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Photographic 

Sciences 

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23  WIST  MAIN  STRiET 

WnSTIR.N.Y.  USM 

(7I«)  •73-4503 


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CIHM/ICMH 

Microfiche 

Series. 


CIHIVI/ICIVIH 
Collection  de 
microfiches. 


Canadian  Institute  for  Historical  Microreproductions  /  Institut  Canadian  de  microreprnductions  historiques 


.^^^^BHH^-? 


T«chnical  and  Bibliographic  Notas/Notas  tachniquaa  at  bibliographiquas 


Tha  Instituta  haa  attamptad  to  obtain  tha  baat 
original  copy  availabia  for  filming.  Faaturaa  of  thia 
copy  which  may  ba  bibliographically  uniqua, 
which  may  altar  any  of  tha  imagaa  in  tha 
raproduction.  or  which  may  significantly  changa 
tha  usual  mathod  of  filming,  ara  chackad  balow. 


□    Colourad  covars/ 
Couvartura  da  coulaur 


I — I   Covars  damagad/ 


D 


D 


n 


D 


Couvartura  andommagia 


Covars  rastorad  and/or  laminatad/ 
Couvartura  rastaurte  at/ou  palliculte 


□   Covar  titia  missing/ 
La  titra  da  couvartura  manqua 

□   Colourad  mapa/ 
Cat'ias  giographiquas 


an  coulaur 

Colourad  ink  (i.a.  othar  than  blua  or  black)/ 
Encra  da  coulaur  (i.a.  autra  qua  blaua  ou  noira) 

Colourad  platas  and/or  illustrations/ 
Planchas  at/ou  illustrations  9n  coulaur 


Bound  with  othar  matarial/ 
RaliA  avac  d'autras  documants 

Tight  binding  may  causa  shadows  or  distortion 
along  intarior  margin/ 

La  re  liura  sarria  paut  causar  da  I'ombra  ou  da  la 
distortion  la  long  da  la  marga  intAriaura 

Blank  laavas  addad  during  rastoration  may 
appaar  within  tha  taxt.  Whanavar  possibla.  thesa 
hava  baan  omittad  from  filming/ 
II  sa  paut  qua  cartainas  pagas  blanchas  ajoutias 
lors  d'una  rastauration  apparaiaaant  dans  la  taxta, 
mais.  lorsqua  cala  4tait  possibla,  cas  pagaa  n'ont 
pas  6x6  filmAas. 

Additional  commants:/ 
Commantairas  supplAmentairas: 


L'Institut  a  microfilm*  la  maillaur  axamplaire 
qu'il  lui  a  itt  possibla  da  sa  procurer.  Las  details 
da  cat  axamplaira  qui  sont  paut-Atra  uniquas  du 
point  da  vua  bibliographiqua.  qui  pauvant  modifier 
una  image  reproduite.  ou  qui  peuvent  exiger  une 
modification  dans  la  mAthoda  normala  de  filmage 
sont  indiquis  ci-dessous. 


r~1   Coloured  pages/ 


Pagaa  de  couleur 

Pagas  damaged/ 
Pagas  andommagtes 

Pages  restored  and/oi 

Pagas  rastaurtas  at/ou  pelliculAes 

Pages  discoloured,  stained  or  foxet 
Pages  dAcolor^es,  tachoties  ou  piqudes 


I — I   Pagas  damaged/ 

I     I   Pages  restored  and/or  laminated/ 

fTl/Pagas  discoloured,  stained  or  foxed/ 

Lid  I 


□   Pages  detached/ 
Pages  ditachies 

[~~T/5howthrough/ 
LL^  Transparence 

r~~|   Quality  of  print  varies/ 


Quality  inigaia  de  I'impression 

Includes  supplementary  material/ 
Comprend  du  material  supplimentaire 

Only  edition  available/ 
Seule  Mition  disponible 


D 


Pages  wholly  or  partially  obscured  by  errata 
slips,  tissues,  etc.,  have  been  refilmed  to 
ensure  the  best  possible  image/ 
Les  pagss  totalement  ou  partiellement 
obscurcies  par  un  feuillet  d'errata,  une  pelure, 
etc.,  ont  M  filmies  A  nouveau  de  fapon  & 
obtenir  la  meilleure  image  possible. 


This  item  is  filmed  at  the  reduction  ratio  checked  below/ 

Ce  document  est  film*  au  taux  da  reduction  indiquA  ci-dessous. 


10X 

14X 

18X 

22X 

26X 

30X 

7 

12X 

16X 

20X 

24X 

28X 

32X 

Th«  copy  fllm«d  h«r«  ha*  bean  raproducad  thanka 
to  tha  ganaroaity  of: 

University  of  Windsor 


L'axamplaira  film*  fut  raproduit  grica  k  la 
gAnAroalt*  da: 

University  of  Windsor 


Tha  imagaa  appaaring  hara  ara  tha  baat  quality 
poaaibia  eonaidaring  tha  condition  and  laglbliity 
of  tha  original  copy  and  In  kaaplng  with  tha 
filming  contract  spacificationa. 


Laa  imagaa  auivantaa  ont  MA  raproduitaa  avac  la 
plua  grand  aoln,  eompta  tanu  da  la  condition  at 
da  la  nattat*  da  l'axamplaira  film*,  at  •» 
conformity  avac  laa  conditiona  du  contrat  da 
fiimaga. 


Original  copiaa  In  printad  papar  covara  ara  filmad 
baglnning  with  tha  front  covar  and  anding  on 
tha  laat  paga  with  a  printad  or  iiluatratad  impraa- 
•ion,  or  tha  back  covar  whan  appropriata.  All 
othar  original  copiaa  ara  filmad  baglnning  on  tha 
firat  paga  with  a  printad  or  iiluatratad  impraa- 
alon,  and  anding  on  tha  laat  paga  with  a  printad 
or  iiluatratad  impraaalon. 


Laa  axamplairaa  orlginaux  dont  la  couvartura  •n 
papiar  aat  imprim^a  iont  fllmte  an  commanpant 
par  la  pramlar  plat  at  an  tarminant  aoit  par  la 
darniira  paga  qui  comporta  una  amprainta 
d'Impraaaion  ou  d'liiuatration,  aoit  par  la  aacond 
plat,  aalon  la  caa.  Toua  laa  autraa  axamplairaa 
orlginaux  aont  filmte  an  commandant  par  la 
pramlAra  paga  qui  comporta  una  amprainta 
d'Impraaaion  ou  d'liiuatration  at  an  tarminant  par 
la  darnlAra  paga  qui  comporta  una  talla 
amprainta. 


Tha  laat  racordad  frama  on  aach  microflcha 
shall  contain  tha  aymbol  — »•  (moaning  "CON- 
TINUED"), or  tha  symbol  y  (moaning  "END"), 
whichavar  applias. 


Un  daa  aymboiaa  sulvants  apparaltra  sur  la 
darnlAra  Imaga  da  chaqua  microflcha,  salon  la 
caa:  la  aymbola  -^^  signlfia  "A  SUiVRE",  la 
symboia  V  signlfia  "FIN". 


Mapa,  platas,  charts,  ate,  may  ba  filmad  at 
diffarant  raductlon  ratios.  Thoaa  too  iarga  to  ba 
antlraly  Includad  in  ona  axposura  ara  filmad 
baglnning  in  tha  uppar  iaft  hand  eornar,  laft  to 
right  and  top  to  bottom,  aa  many  framas  aa 
raqulrad.  Tha  following  diagrams  iilustrata  tha 
mathod: 


l.aa  cartaa,  planchas,  tablaaux,  ate,  pauvant  Atra 
fiimia  A  daa  taux  da  rAduction  diff Arants. 
Lorsquo  la  documant  ast  trop  grand  pour  Atra 
raproduit  an  un  saui  clichA,  11  aat  filmA  A  partir 
da  I'angla  aupAriaur  gaucha,  da  gaucha  A  drolta, 
at  da  haut  an  baa,  an  pranant  la  nombra 
d'imagaa  nAcassaira.  Las  diagrammaa  suivanta 
illustrant  la  mAthoda. 


1  2  3 


1 

2 

3 

4 

5 

6 

I 


^^.  r,  p.  ^, 


/oCb'^/o^  ^  . 


AN  OPEN  LETTER 


TO  TH9 


I) 


ON 


Relations  with  Canada. 


BY 


A.  N.  TOWNE, 


Ttilrd  Vloe-Presldent  and  Qeneral   Manager 
Southern  Pacific  Company-' 


WITH  SOME  REMARKS  ON  THE  FOURTH  AND  FIFTH 
SECTIONS  OF  THE  INTERSTATE  COMMERCE  LAW. 


San  Francisco,  June  20th,  1889. 


SAN  FRANCISCO, 
H.  S.  Crocker  &  Co.,  stationers  and  Printers, 

1889. 


T\ 


W 


To  THE  Honorable  Members 

OF  THE  United  States  Senate  Committee 
ON  Relations  with  Canada, 

Gentlemen :  On  your  recent  visit  of  investigation  to  the 
Pacific  Coast,  in  the  matter  submitted  to  you  by  the  Senate 
of  the.  United  States,  you  honored  me  by  presenting  a 
series  of  questions  bearing  on  the  subject  in  hand,  with  a 
request  for  my  answers  thereto,  also  permitting  me 
to  give  expression  to  my  opinions  and  the  result  of  my 
experience  regarding  the  unhealthy  competition  forced 
on  American  railroads  by  our  neighbors  to  the  north- 
ward. I  must  confess  that  in  this  connection  I  was  astounded 
to  discover  how  little  the  public  at  large  had  studied  this 
question,  and  how  slightly  our  people  appreciated  the  dan- 
ger threatened  to  American  interests  by  Canadian  compe- 
tition in  American  transportation.  I  had  supposed  that 
thinking  men  had  at  least  given  the  matter  a  superficial 
consideration  ;  but  it  remained  for  the  awakening  of  pub- 
lic interest,  by  the  visit  of  your  Committee,  to  convince 
me  of  my  error  in  this  regard. 

The  publication  through  you  of  even  the  more  salient 
facts  has  aroused  the  active  interest  of  many  thinking 
men,  where  before  there  had  been  but  apathy ;  and 
it  developed  that  those  who,  either  on  account  of  their 
personal  interests  or  as  a  matter  of  political  principle, 
are  staunch  advocates  of  a  high  protective  tariff  as  the 
basis  of  our  commercial  and  industrial  prosperity,  had 
never  stopped  to  think  that  unequal  competition  with  for- 
eign railroads,  constructed  and  operated  under  conditions 
inimical  to  us,  was  as  dangerous  to  the  country  as  compe- 
tition with  foreign  wool  or  with  foreign  products  of  cheap 


1 8709; 


labor.  It  did  not  occur  to  them  that  the  invested  capital 
and  widely  ramified  interests  involved  in  the  great  trans- 
portation system  of  the  United  States  were  threatened 
with  disaster  relatively  as  serious  as  the  most  positive  pro- 
tectionist cor.ld  predict  in  case  of  a  Governmental  free- 
trade  policy. 

Although  much  of  public  importance  has  been  said  and 
written  on  the  subject  by  railroad  scientists,  it  has  mostly 
reached  the  ears  and  eyes  of  railroad  men,  but  has  not 
been  brought  into  touch  with  the  public  pulse ;  for  the 
American  people,  as  a  rule,  are  so  self-confident  in  their 
wonderful  prosperity  and  the  power  and  resources  of  their 
country,  that  they  are  careless  of  danger  unless  actually 
confronted  with  it ;  and  it  is  not  until  then  they  arise  in 
their  might  against  interference  or  aggression.  The  Samoan 
episode,  just  brought  to  a  happy  and  honorable  conclusion 
by  the  force  of  American  determination  as  much  as  by  our 
admirable  diplomacy,  is  a  notable  recent  instance  of  this 
spirited  American  characteristic,  and  of  the  respect  enter- 
tained for  it  by  the  most  powerful  countries  of  Europe 
when  deliberately  asserted. 

It  is  because  of  this  arousal  of  public  sentiment  as 
observable  in  California,  and  because  my  mail  is  crowded 
with  requests  for  information  and  data,  that  I  am  impelled 
to  address  your  Honorable  Committee  in  this  form  that  I 
may  thereby  be  enabled  to  cover  broader  ground.  I  beg 
to  assure  you,  gentlemen,  that  I  do  not  undertake  this 
task  frivolously  or  for  the  sake  of  work.  I  assume  it 
rather  as  a  duty  to  the  vast  transportation  interests  of  our 
country;  and  not  less  a  duty  to  those  hundreds  of  thousands 
who,  not  directly  connected  with  transportation  problems, 
have  their  savings — the  thrifty  accumulation  of  provident 
years — invested  in  railway  securities ;  to  those  other 
thousands,  the  innocent  ones  whose  all  is  tied  up  in  those 
securities  set  aside  for.  them  in  loving  forethought ;  to  the 
millions  who  through  their  employment  in  the  various  fields 


of  labor  or  their  mercantile  connections,  are  affected  by 
whatever  either  depresses  or  stimulates  railway  properties; 
while  I  deem  it  a  subject  fraught  with  deep  importance  to 
this  country  and  its  people,  and  will  endeavor  to  consider 
it  with  freedom  from  personal  bias,  self-interest  or  any 
motive  except  the  ultimate  weal  of  the  great  nation  of 
which  I  am  proud  to  be  a  citizen. 

I  will  risk  the  charge  of  being  abruptly  intrusive  by 
reproducing  at  this  stage  the  questions  propounded  to  me 
by  your  Committee  and  my  answers  thereto,  as  per  copy 
on  file  with  your  Honorable  body.  I  do  so,  because, 
in  my  judgment,  they  strike  the  key-note  to  the  danger 
now  menacing  us,  namely,  embarrassment,  financial  and 
industrial,  through  arbitrary  legislative  railway  regulation 
of  a  kind  unknown  and  intolerable  in  any  other  industry 
or  commercial  undertaking,  and  whose  whole  tendency  is  to 
cripple  instead  of  stimulate  beneficent  enterprises  ;  the 
railways  thus  restricted  being  yet  called  upon  to  face  the 
competition  of  foreign  carriers,  and  expected  to  cope  with 
them  effectually  under  conditions  which  seem  to  preclude 
the  possibility  of  success. 


*')uESTioNS  Propounded  to  A.  N.  Towne  by  the 
United  States  Senate  Committee  on  Relations 
WITH  Canada,  and  the  Answers  Thereto  : 

Question  i.  Please  state  your  name,  residence  and 
occupation  ? 

Answer. — A.  N.  Towne,  Third  Vice-President  and 
General  Manager  of  the  Southern  Pacific  Company.  My 
residence  is  in  San  Francisco. 

2.  How  long  have  you  been  connected  with  the  South- 
ern Pacific  Company,  and  in  what  capacities? 


A. — I  came  to  California  twenty  years  ago  to  accept  the 
position  of  General  Snperintendent  of  the  Central  Pacific 
Railroad  Company,  since  leased  to  the  Southern  Pacific 
Company.  Prior  thereto  I  was  connected  with  roads  in 
Illinois  for  fourteen  years  ;  one  year  on  the  Chicago  and 
Great  Eastern,  as  General  Superintendent,  and  thirteen 
years  on  the  Chicago,  Burlington  and  Quincy  Road,  occu- 
pying positions,  passing  through  all  the  grades  in  the 
management  of  transportation  to  that  of  Assistant  Gen- 
eral Superintendent. 

3.  State  what  trans-continental  lines  of  railroad  are  now 
in  operation,  terminating  at  San  Francisco,  what  at  Port- 
land, Oregon,  and  what  upon  Puget  Sound  and  the  Gulf  of 
Georgia.  Also,  what  other,  if  any,  carriers  are  engaged  in 
trans-continental  traffic  ? 

A. — Trans-continental  lines — commencing  at  the  north 
we  have  the  Canadian  Pacific  Railway,  terminating  upon 
the  Gulf  of  Georgia,  at  Vancouver,  B.  C,  using  in  con- 
nection with  its  road  the  Pacific  Coast  Steamship  line  of 
steamers  to  and  from  San  Francisco.  The  next  is  the 
Northern  Pacific  rail  line,  terminating  at  Tacoma,  W.  T., 
and  Portland,  Oregon ;  also  using  the  Pacific  Coast  Steam- 
ship Company's  steamers  to  and  from  San  Francisco,  via 
Tacoma.  The  Northern  Pacific  also  forms  a  through  line 
to  San  Francisco  and  adjacent  cities  in  California,  via  the 
Southern  Pacific  Company's  road  from  Portland.  Then 
comes  the  Oregon  Railway  and  Navigation  Company, 
terminating  at  Portland.  This  road,  in  connection  with 
the  Oregon  Short  Line  and  the  Union  Pacific  Railway, 
forms  a  through  line  to  the  Missouri  River;  between  Port- 
land, Or.,  and  San  Francisco,  this  line  uses  its  own  steamers 
to  form  a  through  line  to  and  from  San  Francisco.  The 
Canadian  Pacific,  Northern  Pacific  and  Oregon  Railway 
and  Navigation  Companies  each  have  a  line  also  to  Cali- 
fornia ports  south  of  San  Francisco,  by  their  use  of  the 
Pacific  Coast  Steamship  Company's  steamers,  thus  being 


able  to  reach,  notably,  San  Diego,  San  Pedro  (the  port  of 
Los  Angeles),  and  Santa  Barbara.  Our  Southern  Pacific 
Company's  line  extends  from  Portland,  Or.,  to  San  Fran- 
cisco, passing  Roseville,  Cal.,  where  a  junction  is  formed 
with  the  Central  Pacific  Railroad,  direct  to  Ogden,  there 
connecting  with  the  Union  Pacific  and  the  Denver  &  Rio 
Grande  Western  Railway,  who  respectively  have  various 
Eastern  rail  connections.  From  San  Francisco  south  the 
Southern  Pacific  Company  forms  a  through  line  with  the 
Atlantic  and  Pacific  road  at  Mojave,  which  connects  with 
the  Atchison,  Topeka,  and  Santa  Fe  road  at  Albuquerque, 
N.  M. ,  for  the  Missouri  river  and  Eastern  points.  From 
Mojave  south  the  Southern  Pacific  Company  has,  via  Los 
Angeles,  another  connection  with  the  Atchison,  Topeka 
and  Santa  Fe  road  at  Deming,  N.  M.,  and  also  connects  at 
El  Paso,  Tex.,  with  the  Texas  and  Pacific  Road,  and 
through  it  with  the  Missouri  Pacific  system.  From  El 
Paso  the  Southern  Pacific  Company's  line  runs  to  New 
Orleans,  there  connecting  with  its  own  line  of  steamships 
for  ports  on  the  Atlantic  seaboard.  We  also  connect  at 
Houston,  Tex.,  San  Antonio,  Tex.,  and  New  Orleans,  La., 
with  several  lines  of  railroad  by  which  we  have  connection 
with  various  Eastern  cities.  Other  carriers  and  important 
ones  are  the  Pacific  Mail  Steamship  Company,  between 
San  Francisco  and  Eastern  Atlantic  seaboard  points,  via 
Panama,  as  well  as  the  clipper  lines,  via  Cape  Horn, 
between  Portland  and  San  Francisco  and  the  port  of  New 
York,  all  strong  competitors  against  the  overland  rail 
carriers. 

4.  Please  state,  if  you  know,  what  companies  are 
engaged  in  the  running  of  steamships  between  the  Pacific 
Coast  and  ports  in  China  and  Japan? 

A — The  Pacific  Mail  Steamship  Company's  steamers  and 
the  Occidental  and  Oriental  Steamship  Company's  steam- 
ers ply  between  San  Francisco  and  ports  in  China  and 


8 


Japan.  The  Canadian  Pacific  Steamship  Company's 
steamers  [/ly  between  Vancover,  B.  C,  and  ports  in  China 
and  Japan. 

5.  Has  there  been,  at  any  time,  and,  if  so,  when  and 
for  l:ow  long,  any  otlier  steamship  company  engaged  in 
said  ti    le? 

A. — During  the  past  fourteen  years  no  steamship  com- 
pany, other  than  those  enumerated  in  answer  to  the  inter- 
rogatory preceding,  has,  to  our  knowledge,  operated 
between  the  Pacific  coast  and  ports  in  China  and  Japan. 

6.  What  steamships  are  owned  by  the  Pacific  Mail 
Steamship  Company,  in  which  trade  are  they  engaged, 
between  what  ports  do  they  ply,  and  how  frequent  are 
their  trips? 

A. — The  Pacific  Mail  Steamship  Company's  steamers 
are:  City  of  Peking,  City  of  Sydney,  City  of  New  York, 
and  City  of  Rio  de  Janeiro.  The  Occidental  and  Oriental 
Steamship  Company's  steamers  are  :  Belgic,  Gaelic,  Ara- 
bic and  Oceanic.  The  steamers  of  both  these  lines  ply 
between  San  Fraucisco  and  ports  of  Yokohama,  Japan,  and 
Hongkong,  China,  with  steamer  connections  for  other  ports 
in  Japan  and  China.  The  Pacific  Mail  and  Occidental  and 
Oriental  steamers  make  alternate  trips  in  both  directions: 
their  combined  sailings  averaging  three  steamers  a  month 
in  each  direction.  Attached,  marked  ''Exhibit  A,"  is 
the  printed  list  of  sailings  of  these  steamship  companies 
outward  bound  from  November  28,  1888,  to  December  31, 
1889,  and  homeward  bound  from  January  8,  1889,  to  Feb- 
ruary 6,  1890,  both,  of  course,  subject  to  such  changes  as 
the  necessities  of  the  traffic  may  demand. 

7.  State,  generally,  the  character  of  the  trade  in  which 
they  are  engaged. 

A. — The  steamers  plying  between  San  Francisco,  Cali- 
fornia, and  ports  in  China  and  Japan,  are  engaged  in  a 
general  passenger  and  freight  traffic.     The  principal  ex- 


ports  are  flour  and  vspecie.  The  imports  are  tea,  raw  and 
manufactured  silk,  rice,  gunnies,  hemp,  jute  and  general 
merchandise. 

8.  Please  state,  if  you  know,  what  company  is  engaged 
in  running  steamships  between  Vancouver  and  ports  of 
China  and  Japan. 

A. — The  so-called  Canadian  Pacific  Steamship  Company 
runs  a  line  of  steamers  between  Vancouver  and  ports  in 
China  and  Japan. 

9.  What  steamships  are  owned  and  controlled  by  that 
company,  between  what  ports  do  they  ply,  how  frequent 
are  their  trips,  and  what  is  the  general  character  of  the 
trade  in  which  they  are  engaged  ? 

A. — The  steamers  owned  or  controlled  by  the  Canadian 
Pacific  Pail  way  are  :  Abyssinia,  Parthia,  Port  Augusta, 
Batavia  and  Port  Fairy,  plying  between  Vancouver,  B.  C, 
and  the  ports  of  Yokohama;  Japan,  and  Hongkong 
China,  with  steamer  connections  for  other  ports  in 
China  and  Japan,  and  competing  with  steamers  of  the 
Pacific  Mail  and  Occidental  and  Oriental  Companies  in 
every  Asiatic  port  at  which  the  latter  companies  have 
sought  business.  Their  schedule  of  sailings  is,  I  believe, 
as  per  *'  Exhibit  B,"  herewith,  outward  bound  from  May 
14,  1889,  to  November  29,  1889,  and  homeward  bound 
from  April  4,  1889,  to  October  24,  1889.  They  engage 
in  general  passenger  and  freight  traffic.  The  principal 
exports  are  flour  and  cotton  goods,  otherwise  known  as 
domestics,  the  Canadian  Pacific  having  already  been  suc- 
cessful in  diverting  from  United  States  lines  almost  the 
entire  cotton-piece-goods  trade  of  the  Eastern  States. 
The  principal  imports  are  tea,  raw  and  manufactured  silk, 
rice,  gunnies,  hemp,  jute  and  general  merchandise.  They 
compete  with  the  American  steamer  lines  named  to  and  from 
the  port  of  San  Francisco  in  every  item  of  traffic  in  which 
the  San  Francisco  lines  are  engaged,  except  perhaps,  from 
financial  causes,  the  single  item  of  American  specie.     The 


10 


Canadian  Pacific  Railway  also  runs  its  own  steamers  on 
the  great  lakes.  I  am  not  acquainted  with  the  names 
of  the  steamers  or  the  frequency  of  their  trips,  but  under- 
stand they  are  operated  in  conjunction  with  the  Canadian 
Pacific  rail  line  to  afford  the  most  feasible  connections 
with  points  on  the  great  lakes. 

10.  State,  if  you  know,  what  Government  aid,  if  any, 
said  company  has  received  or  is  receiving. 

A. — I  understand  the  Dominion  Government  has  granted 
the  Canadian  Pacific  Railway  a  subsidy  or  bonus  of 
$25,000,000;  has  donated  to  it  25,000,000  acres  of  land, 
embracing  only  such  as  are  suitable  for  settlement;  has 
also  given  right  of  way,  station  grounds,  dock  privileges 
and  water  frontage,  in  so  far  as  within  the  control  of  the 
Government;  and,  further,  has  constructed  ar.d  trans- 
ferred to  the  Canadian  Pacific  Railway  Company,  free  of 
cost,  714  miles  of  railway,  the  estimated  value  of  which, 
according  to  that  railway  company's  report  for  the  year 
1887  is  $35,000,000.  The  Canadian  Pacific  was  permitted 
to  import  steel  rails  free  of  duty,  also  other  material  used 
in  the  construction  of  its  road  and  telegraph  line.  Under 
its  charter,  the  Canadian  Pacific  is  freed  for  all  time  from 
taxation  by  the  Dominion  Government  or  by  any  Pro- 
vincial Government  established  after  date  of  its  charter. 
'Its  land  grant  in  the  northwest  territory  is  free  from  tax- 
ation for  twenty  years  unless  sold  in  the  mean  time.  In 
addition  to  all  this  the  Canadian  Government  has  bound 
itself  not  to  permit,  during  the  term  of  twenty  years,  the 
building  of  any  line  or  lines  that  would  parallel  the  Cana- 
dian Pacific  Railway.  This  we  believe  to  be  the  most 
liberal  grant  ever  bestowed  by  a  constitutional  Government. 

11.  State  whether  or  not  any  freight  shipped  at  San 
Francisco  for  Boston,  New  York,  and  other  Atlantic  ports 
of  the  United  States,  is  shipped  via  the  Canadian  Pacific 
Railway  ;  if  so,  about  how  much,  and  by  what  transpor- 
tation lines  is  it  transported  to  the  Pacific  terminus  of 
said  road  ? 


any, 


II 

A. — As  per  my  answer  to  third  interrogatory,  the  steam- 
ers of  the  Pacific  Coast  Steamship  Company  are  used  by 
the  Canadian  Pacific  Railway  for  transporting  its  freight  be- 
tween San  Francisco,  Cal.,  and  Vancouver,  B.  C.  After  the 
completion  of  the  Canadian  Pacific  Railway,  that  company 
made  arrangements  to  reach  San  Francisco  by  means  of 
the  steamers  of  said  steamship  company,  and  have  ever 
since  sought  and  obtained  a  share  of  east-bound  through 
traffic.  For  example  :  In  1887  their  ^ast-bound  through 
freight  from  San  Francisco,  via  Vancouver,  amounted  to 
7,274  tons,  including  several  million  pounds  of  sugar,  also 
large  quantities  of  wool,  leather,  hides,  beans  and  dried 
fruit. 

During  the  sixteen  months  from  January  i,  1888,  to 
April  30,  1889,  the  Canadian  Pacific  secured  a  tonnage  of 
some  ten  million  pounds  from  the  following  principal 
items  of  east-bound  shipment :  Wool,  sugar,  canned  goods, 
borax,  canned  and  pickled  salmon,  hides,  horns,  leather, 
beans,  wine,  dried  fruit  and  prunes,  mustard  seed,  cocoa, 
coffee  and  logs.     Thus  : 

POUNDS. 

Wool     .    .    .    . 5.029,243 

Sugar 1,099,091 

Canned  goods 1,701,633 

Borax 338,070 

Salmon,  canned  and  pickled      264,860 

Hides 81,515 

Horns 153,626 

I^eather 146,800 

B^ans 143,750 

Wme 91,830 

Dried  fruit  and  prunes 375,152 

Mustard  seed 56, 745 

Cocoa 25,700 

Coffee 50,877 

I^ogs 375,960 


12 


I 


This  freight  was  for  points  in  the  Unit  \  States  east  of 
the  Mississippi  river,  chiefly  Atlantic  i>t-  )ard  cities  and 
cities  east  of  and  including  Chicago. 

The  efforts  put  forth  by  the  Canadian  Pacific  Railway  to 
secure  the  west-bound  freight  are,  we  have  reason  to 
believe,  not  less  active  than  those  employed  in  securing 
east-bound  tonnage;  but  it  is  ver>'  difficult  for  us  at  this 
western  end — who  handle  none  of  the  west-bound  traffic 
of  that  foreign  route — to  determine  with  any  degree  of 
precision  the  extent  and  value  of  their  west-bound  busi- 
ness, from  eastern  to  western  United  States  points.  We 
have  been  able  to  ascertain,  however,  that  in  1887  that 
company  carried  not  more  than  5, 500,000  pounds  of  such 
west-bound  freight,  while  in  the  year  1888  they  increased 
their  traffic  to  an  amount  not  less  than  13,750,000 
pounds  in  the  aggregate;  and  our  best  advices  indicate  that 
we  need  not  be  surpriseu  if  the  extraordinary  ratio  of 
increase  thus  indicated  should,  under  existing  circum- 
stances, be  greatly  exceeded  for  1889.  As  illustrative  of 
the  probability,  I  may  cite  that  an  examination  of  the 
manifests  of  the  Pacific  Coast  Steamship  Company's 
steamers  arriving  at  this  port  from  Vancouver  with  freight, 
ex  Canadian  Pacific  Railway,  show  that,  during  the  first 
four  months  of  1888,  there  were  brought  here  by  that 
route,  20,059  packages,  the  weight  of  which  we  cannot 
determine;  whereas,  during  the  first  four  months  of  1889, 
the  number  of  packages  so  landed  here  has  increased  to 
88,376  packages. 

12.  Please  state  what  steam  or  other  vessels  are 
engaged  in  transporting  between  San  Francisco  and  Brit- 
ish Columbia. 

A. — The  Oregon  Railway  and  Navigation  Company's 
steamers  to  Portland,  with  connecting  steamers  northward; 
the  Pacific  Coast  Steamship  Company  and  the  Wells'  line 
of  clippers  and  steam  coasters  are,  I  believe,  the  only 
transportation  lines  regularly  plying  between  San  Fran- 


are 
Brit- 

any's 
ward; 
line 
only 
ran- 


13 

CISCO  and  British  Columbia,  although  there  are  probably 
other  sailing  and  steam  coasting  craft  engaged  in  the 
traffic.  For  a  time  the  Canadian  Pacific  steamers  to  and 
from  China  and  Japan  ran  to  and  from  Vancouver  via 
San  Francisco,  calling  here  on  each  trip,  and  may  do  so 
again  when  they  deem  it  expedient. 

13.  What  efforts  are  made  and  what  inducements 
offered  by  the  Canadian  Pacific  Railway  to  secure  the 
shipment  of  freight  from  San  Francisco  to  Atlantic  ports 
of  the  United  States  by  its  road? 

A. — On  August  18,  1886,  the  Canadian  Pacific  Railway 
announced  the  establishment  at  San  Francisco  of  a  gen- 
eral agency,  for  the  securing  of  freight  and  passenger 
traffic,  a  General  Agent  being  then  appointed  to  actively 
enter  the  field  for  business.  That  general  agency  is  still 
maintained,  and  has  at  all  times  since  that  date  been 
actively  competing  for  the  overland  traffic. 

The  inducements  offered  are  careful  attention  to  the 
traffic  and  quick  time,  coupled  with  a  lower  rate  when 
shipments  are  made  by  the  Canadian  Pacific  Railway, 
than  when  made  by  the  American  rail  lines.  At  the 
present  time  the  relative  rates  charged,  for  example,  to 
the  Atlantic  seaboard  points — New  York,  Boston,  Phila- 
delphia, etc. — by  the  American  lines  and  by  the  Canadian 
Pacific  are  as  follows,  governed  by  the  Western  claassifica- 
tion,  like  class-rates  and  like  differentials  applying  also  on 
overland  freight  shipped  from  the  Eastern  to  the  Pacific 
States: 

AMERICAN   LINES. 

I  2345ABCDE 

420      370      295      230      200      200      180      145      130      120 

CANADIAN   PACIFIC   RAILWAY. 

I  2345ABCDE 

380      335      270      210      180      185      165      133      120    II2>^ 

To  illustrate  by  commodities:  The  rate  on  grease  wool, 
compressed  in  bales,  from  San  Francisco  to  New  York  by 


14 


!l  I 


the  American  rail  lines,  is  $1.50  per  100  pounds,  while 
shipments  by  the  Canadian  Pacific  are  charged  $1.38  per 
100  pounds,  being  a  differential  of  12  cents  in  favor  of  the 
Canadian  Pacific.  By  the  American  rail  lines  canned 
goods,  in  carloads,  to  New  York  are  charged  ^1.20  per 
100  pounds,  while  shipments  by  the  Canadian  Pacific  are 
charged  $1.10  per  100  pounds. 

During  the  sixteen  months  ending  April  30,  1889,  the 
Canadian  Pacific  carried  from  San  Francisco  to  St.  Paul 
1,099,091  pounds  of  sugar,  at  a  rate  of  60  cents  per  100 
pounds,  while  the  rail  lines  in  the  United  States  would 
charge  65  cents  per  100  pounds  thereon. 

These  differential  rates  which  the  United  States  roads 
were  compelled  to  accord  the  Canadian  Pacific  Railway 
were  devised  as  the  best  available  plan  for  preventing  that 
foreign  competitor  from  practically  destroying  the  through 
traffic  of  the  United  States  roads,  because,  the  Canadian 
Pacific's  local  business  not  being  subject  to  the  interstate 
commerce  law,  they  are  in  a  position  to  absolutely  dictate 
and  control  the  rates  at  which  the  United  States  lines  may 
carry  through  traffic,  by  simply  underbidding  United 
States  lines  and  pursuing  that  policy  until  they  obtain  a 
recognition  which  their  geographical  position  and  com- 
mercial influence  could  not  themselves  secure. 

It  may  be  true  that,  theoretically,  the  Canadian  Pacific 
Railway  is  subject  to  the  interstate  commerce  law  on  inter- 
state traffic  passing  to  or  from  Canada.  But  it  is  obvious 
that,  while  the  United  States  roads  are  subject  to  all  the 
restraints  the  Interstate  Commerce  Act  imposes,  it  is  im- 
possible for  this  Government  to  hold  the  Canadian  Pacific 
Railway  to  an  observance  of  the  law;  for  the  United  States 
can  have  no  jurisdiction  over  the  rates  charged  on  inter- 
mediate business  picked  up  and  laid  down  in  Canada, 
which,  together  with  the  relatively  small  amount  inter- 
changed between  points  in  Canada  and  the  United  States, 


15 


J,  while 
.38  per 
•  of  the 
canned 
.20  per 
:ific  are 

^89,  the 
t.  Paul 
per  100 
1  would 

IS  roads 

Railway 

ng  that 

through 

anadian 

iterstate 

dictate 

les  may 

United 

tain  a 

d  com- 

Pacific 
inter- 
)bvious 
lall  the 
is  im- 
Pacific 
States 
inter- 
[anada, 
inter- 
IStates, 


amounts  to  96  per  cent  of  that  company's  entire  earnings, 
according  to  a  published  letter  from  the  President  of  that 
company. 

The  Canadian  Pacific  Railway  can  thus  make  rates  on 
through  business  without  interfering  with  its  earnings  on 
traffic  between  Vancouver  on  the  west  and  Canadian  fron- 
tier points  on  the  east,  or  between  points  intermediate 
thereto.  Even  on  business,  for  example,  from  San  Fran- 
cisco to  Canadian  points,  formerly  wholly  enjoyed  by  the 
American  roads,  we  have  no  means  of  knowing  whether 
the  Canadian  Pacific  Railway  obeys  the  law  or  not  in  this 
regard;  for  that  company  might  take  freight  to  Winnipeg 
at  a  higher  rate  than  for  same  class  of  traffic  through 
Winnipeg  to  Chicago;  but  the  consignee  in  Canada,  even 
if  he  knew  our  law,  would  be  very  unlikely  to  seek  or 
receive  redress  from  a  United  States  Court  or  Commission 
as  against  a  Canadian  road. 

Shippers  from  time  to  time  aver,  m  forsaking  United 
States  lines,  that  one  inducement  to  ship  by  the  Canadian 
Pacific  is  that  the  published  classification  is  closely 
adhered  to  if  freight  is  shipped  by  the  American  lines; 
whereas,  if  they  ship  by  the  Canadian  Pacific,  there  are  no 
precautions  against  improper  representations  of  contents 
of  packages  or  under-billing.  We  have  neither  the  right 
nor  the  power  to  test  whether  such  allegations  are  well- 
founded  or  not. 

I  may  observe,  however,  that  the  Southern  Pacific  Com- 
pany is  the  receiving  carrier  for  all  east-bound,  and  the 
delivering  carrier  for  all  west-bound,  overland  freight  trans- 
ported by  rail  from  or  to  San  Francisco  and  adjacent  cities 
in  California,  and  as  such  is  held  to  a  strict  accountability 
for  proper  classification  and  billing  of  freight,  both  by 
reason  of  its  own  interests  and  the  jealousies  of  lines 
interested  on  the  one  hand,  and  for  the  due  protection  of 
the  public  on  the  otlier.  The  Canadian  Pacific,  on  the 
contrary,  being  practically  its  own  censor,  and  at  the  same 


i6 


M   I 


time  eager  to  secure  traffic,  would  naturally  not  be  very 
solicitous  to  detect  the  schemes  of  shippers  for  evading 
the  published  tariffs. 

14.  State  generally  what  is  the  effect  of  competition  of 
the  Canadian  Steamship  Company  upon  American  lines. 

A. — The  Southern  Pacific  Company  and  connections 
have  suffered  a  large  loss  of  revenue  through  Asiatic 
traffic  being  diverted  by  the  Canadian  Pacific  steamers  for 
transportation  via  Vancouver  to  and  from  points  in  the 
United  States  and  Canada,  which,  before  those  steamers 
were  put  in  operation,  reached  its  destination  by  way  of 
San  Francisco. 

The  first  Canadian  Pacific  steamer  in  competition  with 
lines  delivering  at  San  Francisco  sailed  from  Yokohama  May 
31,  1887;  but,  in  their  anxiety  to  jnake  their  influence  felt 
in  the  commerce  of  the  Pacific  and  divert  the  traffic  from 
American  lines,  they  ran  a  line  of  clippers,  commencing 
with  the  bark  *' W.  B.  Flint,"  from  Yokohama,  June  20, 
1886,  and  in  that  year  thus  diverted  7,300,000  pounds  of  tea 
to  the  Vancouver  route.  During  the  year  1888,  nineteen 
steamers  delivered  their  cargoes  of  tea  and  silk  to  the 
Canadian  Pacific  Railway  at  Vancouver,  which  consign- 
ments would  otherwise  have  been  forwarded  through  San 
Francisco  over  American  roads.  The  traffic  value  of  this 
diversion  cannot  be  accurately  determined  through  lack  of 
the  full  details  necessary  for  exact  calculation ;  but  it  is 
safe  to  say  that,  merely  by  this  diversion  from  San  Fran- 
cisco, the  loss  to  the  Southern  Pacific  Company  and  con- 
nections for  the  year  1888  on  such  east-bound  business  was 
not  less  than  $272,000  on  tea  and  $23,000  on  silk,  or  a 
total  loss  for  the  year  of  say  $300,000. 

Further,  for  the  year  1887,  the  American  lines  carried 
19,333,524  pounds  of  tea;  while  for  the  season  of  1888 
they  carried  but  15,687,565  pounds,  being  a  loss  of  29 
per  cent. 


e  very 
vading 

tion  of 
ines. 
ections 
Asiatic 
lers  for 
in  the 
earners 
way  of 

in  with 
naMay 
nee  felt 
ic  from 
lencing 
une  2o, 
s  of  tea 
ineteen 
to  the 
onsign- 
gh  San 
of  this 
lack  of 
ut  it  is 
Fran- 
id  con- 
;ss  was 
or  a 

:arried 

1888 

of  29 


/ 


On  the  other  hand,  during  the  season  of  1887,  the 
Canadian  Pacific  carried  9,900,962  pounds  of  tea,  but  in 
1888  carried  13,582,911  pounds,  being  a  gain  of  37  per 
cent.  Of  course,  every  pound  of  tea  carried  by  the  Cana- 
dian Pacific  was  business  which  the  American  lines  should 
still  have  enjoyed.  The  loss  in  tonnage,  however,  repre- 
sents but  partially  the  damage  done  by  the  competition  of 
the  Canadian  lines. 

The  average  through  rate  from  Asia  to  Eastern  cities  on 
tea  in  1885  was  $2.97  per  100  pounds,  in  1886  was  $2.77, 
in  1887  fell  to  ,$2.08,  and  in  1888  was  further  forced  down 
by  the  foreign  competition  to  ^1.73  per  100  pounds.  In- 
cidentally, it  may  be  observed  that  the  difference  in  the 
freight  rate  cannot  benefit  the  consumer  to  any  appreciable 
extent,  although  aggregating  large  losses  in  revenue  to  the 
American  carriers. 

Further,  in  this  connection,  I  would  call  attention  to 
the  fact  that,  as  the  average  through  tea  rate  in  1885  was 
$2.97  per  100  pounds,  Canadian  Pacific  competition  not 
then  existing,  we  may  calculate  that  to  be  the  rate  we 
should  have  enjoyed  in  1888  but  for  such  competition,  on 
which  basis  the  American  through  lines,  ocean  and  rail, 
via  San  Francisco,  lost  nearly  ^660,000  on  the  diverted 
tea  tonnage  alone.  Similarly,  on  the  raw  silk  shipments, 
American  steamer  and  rail  lines  may  be  set  down  as  losing 
no  less  than  $46,000,  or  over  $700,000  lost  on  the  items  of 
diverted  tea  and  raw  silk  alone. 

The  American  lines,  too,  carried  this  reduced  tonnage 
at  low  rates  under  an  increased  operating  expense,  the  rail 
lines  being  compelled,  by  the  Canadian  Pacific's  aggres- 
sive efforts,  to  give  the  silk  passenger- train  service,  and  the 
tea  special,  fast  service  as  against  the  slower  but  satis- 
factory service  formerly  given  these  commodities. 

It  is  important  to  bear  in  mind  that  these  figures  include 
only  tea  and  raw  silk  carried  during  the  year  1888  on 
through  bills  of  lading  from  Asiatic  ports  to  Eastern  cities 


it' 


I'  jllili' 


i 


!!  !  r    !         I 


r8 


and  diverted  to  the  Canadian  Pacific  line,  via  Vancouver, 
but  do  not  include  the  miscellaneous  merchandise  diverted 
to  that  route  or  the  tonnage  carried  by  steamers  df  the 
Canadian  line  to  Pacific  Coast  ports  in  the  United  States, 
all  of  which  was  formerly  transported  by  American  com- 
panies. Neither  do  they  take  into  account  the  fact  that 
practically  all  the  Asiatic  tonnage  the  American  steamer 
lines  did  themselves  secure  in  competition  with  the  Cana- 
dian Pacific  line  was  at  greatly  reduced  rates  owin^  to  that 
competition. 

As  to  west-bound  tonnage  carried  by  the  Canadian 
Pacific  Company  from  Eastern  cities  of  the  United  States 
to  Asia,  we  have  little  definite  information;  and  we  have 
no  statistics  as  to  the  tonnage  from  Pacific  Coast  ports  to 
Asia,  diverted  by  the  Canadian  Pacific  line  from  the  Pacific 
Mail  and  Occidental  and  Oriental  Steamship  Companies' 
lines  from  San  Francisco.  From  data  furnished  by  the 
United  States  Inspector  of  Customs  at  Vancouver,  B.  C, 
it  appears  that  of  cotton-piece  goods,  or  domestics  alone, 
5,351,668  pounds  were  exported  from  the  New  England 
States  through  that  port  during  the  last  six  months  of 
1888.  During  the  twelve  months  preceding,  which  ended 
June  30,  1888,  there  were  exported  by  that  route  5,625,000 
pounds  of  these  goods.  These  figures  indicate  a  rapid 
increase  of  the  volume  of  this  branch  of  traffic;  and  in 
confirmation  of  this  conclusion  it  may  be  noted  that  during 
the  month  of  January,  1889,  ^0  ^^^s  than  2,400,000  pounds 
of  these  goods  were  similarly  exported  via  Vancouver.  As 
the  total  export  of  cotton  goods  from  the  United  States  to 
China  during  the  year  1888  amounted  to  31,000,000  yards, 
or  about  10,000,000  pounds,  it  would  therefore  appear  that 
eighty  per  cent  of  the  total  export  of  cotton  goods  from 
the  United  States  to  China  during  the  year  1888  were 
shipped  over  the  Canadian  Pacific  Railway  and  steamer 
lines.  It  is  fair  to  assume  that  the  Canadian  Pacific's 
influence  in  the  diversion  of  miscellaneous  American 
manufactures  is  also  becoming  serious. 


19 


couver, 
liverted 
5  df  the 
States, 
111  corn- 
act  that 
steamer 
[t  Cana- 
I  to  that 

Canadian 
:d  States 
we  have 
;  ports  to 
e  Pacific 
mpanies' 
d  by  the 
jr,  B.  C, 
cs  alone, 
ngland 
lonths  of 
1  ended 
625,000 
a  rapid 
and  in 
it  during 
o  pounds 
iver.    As 
States  to 
X)  yards, 
Dear  that 
ods  from 
;88  were 
steamer 
Pacific's 
merican 


As  to  passenger  business,  the  influence  of  the  Canadian 
Pacific  line  on  the  passenger  traffic  formerly  transported 
by  American  carriers  can  be  but  imperfectly  detennined, 
on  account  of  the  difficulty  of  obtaining  statistics  which 
convey  an  adequate  idea  of  the  variations  in  the  business 
involved.  We  are  unable  to  say  to  what  extent  ocean  pas- 
senger travel  between  the  Pacific  coast  and  Asiatic  ports, 
in  either  direction,  has  been  diverted  from  the  Pacific  Mail 
and  Occidental  and  Oriental  Steamship  Companies  to  the 
Vancouver  route,  and  likewise  have  no  data  within  reach 
to  show  what  travel  between  European  points  and  Asia, 
across  the  North  American  continent,  has  been  lost  to  the 
American  rail  and  ocean  companies  through  the  competi- 
tion of  the  Canadian  carriers. 

We  are  able  to  state,  however,  on  the  authority  of  the 
Auditor  of  the  Trans-continental  Association,  that  there 
were  10,460  through  passengers  by  way  of  the  Canadian 
Pacific  Railway  to  and  from  the  principal  cities  in  Cali- 
fornia, Oregon,  Washington  Territory  and  the  western 
coast  of  British  Columbia  during  the  six  months  ending 
December  31,  1888.  • 

This  travel,  amounting  to  say  21,000  passengers  per 
annum,  must  have  sought  the  American  lines  had  this 
foreign  competitor  not  been  in  the  field. 

15.  What  remedy,  if  any,  do  you  suggest  to  protect 
American  railroad  and  steamship  lines  against  the  compe- 
tition of  the  Canadian  Pacific  road  and  the  Canadian 
steamship  line  ? 

A. — The  Canadian  Pacific  Company  exists  and  compels 
recognition.  It  came  into  existence,  it  is  true,  under 
more  favorable  conditions  than  any  other  transportation 
line  on  the  American  continent  It  is  a  privileged  com- 
petitor against  the  carriers  in  the  United  States,  and  the 
reasons  for  this  are  many  and  exceptional.  The  road 
extends  from  Montreal,  on  the  St.  Lawrence,  to  Vancouver 
in  British  Columbia,  a  distance  of  2,905   miles.     It  also 


i 


ao 


!    I 


I  ! 


I 


has  lines  to  Quebec  and  into  the  State  of  Maine,  and 
direct  connections  with  many  of  the  United  States  roads, 
thus  giving  it  entry  into  the  principal  seaport  and  interior 
cities  of  the  United  States  between  the  Atlantic  seaboard 
and  the  Missouri  river.  It  also  has  direct  connection  with 
the  Northwest  through  Winnipeg  and  St.  Paul,  connecting 
with  several  domestic  roads — in  all  controlling  a  mileage 
of  4,960.  Its  road  is  well  equipped  with  rolling  stock  of 
modern  design  and  in  great  abundance.  It  runs  its  own 
steamers  on  the  great  lakes,  and  is  now  building  a  line 
to  Halifax,  Nova  Scotia,  soon  to  be  in  operation,  which 
will  give  it  a  connection  with  European  ports  nearer  by 
several  hundred  miles  than  any  United  States  ports. 

The  Canadian  Pacific  road,  as  an  individual  corporation, 
has  really  been  built  by  the  Canadian  Government,  their 
gifts  of  money,  of  land  and  of  credit  being  unexampled 
in  the  history  of  the  world,  not  hesitating  even  at  largely 
increasing  the  national  debt  to  expedite  the  road's  com- 
pletion. 

As  already  mentioned,  the  Canadian  Pacific  Railway  is, 
under  its  charter,  freed  for  all  time  from  taxation,  by  the 
Dominion  or  by  any  Province  established  after  the  date  of 
the  charter.  Its  land  grant  in  the  western  territory  is  also 
freed  from  taxation  for  twenty  years,  unless  sold  in  the 
meantime. 

The  Canadian  Pacific  Railway,  in  consequence  of  the 
munificent  aid  it  has  received,  has  the  lowest  fixed  charges 
of  any  system  of  roads  on  the  American  continent,  being 
less  per  mile  by  one-half  than  the  average  fixed  charges 
per  mile  of  the  combined  United  States  roads  for  interest 
on  their  bonded  debt  alone.  It  also  has  cheap  labor  and 
material  for  its  construction,  repairs  and  maintenance  ex- 
penses. It  has,  accessible  to  a  large  portion  of  its  lines, 
extensive  fields  of  coal  of  the  finest  quality  and  in  exhaust- 
less  quantity,  thus  insuring  an  abundant  fuel  supply  at  low 
prices,  in  contrast  with  which  the  item  of  fuel  alone  is  a 


M    '.li 

'ill  k' 


ai 


le,  and 
s  roads, 
interior 
eaboard 
on  with 
necting 
mileage 
stock  of 
its  own 
g  a  line 
,   which 
:arer  by 
:s. 

)oration , 
lit,  their 
xanipled 
t  largely 
d's  corn- 
way  is, 
by  the 
date  of 
•y  is  also 
in  the 

of  the 
charges 
being 
charges 
interest 
ibor  and 
ince  ex- 
ts  lines, 
^xhaust- 
|y  at  low 
bne  is  a 


most  serions  expense  to  the  Sonthern  Pacific  Company, 
which  pays  a  greater  price  therefor  than  any  other  com- 
pany on  this  continent,  the  6,cx)o  miles  of  conntry  through 
which  its  roads  run  being  without  available  coal. 

This  much-favored  foreign  company  should  not  enjoy 
privileges  and  immunities  denied  the  railroads  of  the 
United  States  under  the  interstate  commerce  law,  which, 
so  far  as  it  concerns  the  subject  under  consideration, 
should,  as  I  view  it,  be  so  amended  as  to  recognize  the 
unequal  contest  in  which  the  United  States  carriers  are 
forced  to  engage  with  foreign  carriers  seeking  United 
States  or  international  traffic. 

Interstate  or  international  traffic  of  foreign  carriers 
should  therefore  be  regulated  by  treaty  and  legislation,  or 
other  adequate  means.  Further  than  this,  the  law  should 
include  all  transportation  lines — water  as  well  as  rail — 
competing  for  the  traffic  upon  which  the  railroads  of  the 
United  States  depend  for  revenue  to  meet  their  financial 
obligations,  which  is  of  the  utmost  importance  to  the 
people  dependent  on  the  roads  and  enjoying  the  benefits 
they  confer. 

It  has  recently  been  announced  that  a  grant  of  ;^6o,ooo, 
or,  in  round  figures,  $300,000  per  annum,  has  been 
arranged  with  her  Britannic  Majesty's  Government  as  a 
postal  subsidy  for  a  line  of  steamers  to  carry  the  mails 
between  Vancouver  and  Chinese  and  Japanese  ports.  It  has 
been  asserted  also  that  an  admiralty  or  secret  subsidy  is 
additionally  provided  for  these  steamers. 

Compare  with  this  the  total  amount  paid  by  the  United 
States  of  less  than  $17,000  for  the  carriage  via  San  Fran- 
cisco in  1888  of  trans-Pacific  postal  mattter  which  was 
nearly  thirty  times  heavier  than  that  of  the  Canadian  line. 
In  other  words,  and  the  British  Dominion  Governments 
are  contributing  most  liberally  to  the  cost  of  maintaining 
a  steamship  line  across  the  Pacific,  just  as  the  Dominion 
Government  paid  so  bountifully  towards  the  construction 


i  'm 


Jli 


II' 
iti 


"  i     I 


of  their  great  military  and  commercial  railroad  line  across 
the  continent.  A  steamship  line  thus  subsidized  an.  I  con- 
trolled by  an  overland  ron'^  under  one  management  from 
ocean  to  ocean ,  admirably  built  and  with  a  magnif  «t 
equipmen'  far  in  excess  of  current  needs,  unhampered  by 
our  resti  Jtive  commerce  laws,  is  naturally  taking,  grad- 
ually but  surely,  the  traffic  properly  belonging  to  the 
carriers  of  the  United  States. 

The  Canadian  Pacific  Company,  then,  being  practically 
exempt  from  our  laws,  can  di.  fate  the  rates  and  most  suc- 
cessfully compete  for  t' '  >  ai  continental  traffic,  taking 
the  same  at  less  rate,  thp  li  tin  United  States  roads  can 
afford  to  accept;  taking  t  too,  without  depleting  the  rev- 
enue natuial  to  'ind  necessary  for  its  local  traffic.  The 
United  States  roads,  on  the  other  hand,  are  tied  up  under 
restrictive  provisions,  and  are  compelled  to  make  large  sac- 
rifices of  their  local  earnings  if  they  would  compete  with 
the  foreign  lines  for  the  through  traffic.  It  may  be  said 
that  there  is  no  conflict  apparent  between  the  United 
States  carriers  and  their  Canadian  competitors;  but  there 
is  no  conflict  only  because  the  foreign  line  stands  in  the 
position  of  a  victor,  for  it  was  able  to  demand  unreason- 
able concessions  as  the  price  of  its  co-operation  with  the 
overland  roads  of  the  United  States,  who  had  to  accept 
the  best  terms  they  could  obtain.  Were  that  company  in 
reality  subject  to  the  same  rigid  restrictions  as  the  United 
States  roads,  it  could  not  have  enforced  unreasonable 
demands,  nor  could  it,  in  this  or  any  other  respect,  be  in  a 
position  to  transact  business  within  the  limits  of  the 
United  States  under  conditions  more  favorable  than 
accorded  to  American  lii'es.  Therefore,  I  am  of  the  opin- 
ioii,  \'''(^.T  yea^  ox  experience  and  observation  in  traffic 
aiiuirs,  that  if  any  of  the  carriers  are  subjected  to  legisla- 
tive restrictions,  all  the  competing  carriers,  domestic  and 
foreign,  rail  and  water,  should  be  placed  under  like  and 
uniform  control. 


2.1 


;  across 
n<l  cou- 
nt from 

>ere{l  by 

^,  ^rad- 

to  the 

ictically 
lost  suc- 
:,  taking 
)ads  can 
the  rev- 
c.     The 
ip  under 
arge  sac- 
ete  with 
be  said 
United 
)ut  there 
IS  in  the 
nreasou- 
ith  the 
0  accept 
pany  in 
United 
sonable 
be  in  a 
of   the 
lie   than 
lie  opin- 
n  traffic 
legisla- 
Itic  and 
ke   and 


The  results  sought  should  be  fair  and  remunerative  rates 
for  the  carriers,  aw«.l  at  the  same  time  reasonable  and  stable 
rates  for  the  publK\ 

As  between  Anicrican  rail  carriers,  the  great  obstacle 
(apart  from  foreign  competition)  heretofore  encountered  in 
maintaining  stability  of  rates,  is  the  competition  of  ocean 
and  inlar  \  water  carriers.  These  water  carriers  should,  I 
believe,  be  made  stric  N  amenable  to  the  interstate  com- 
merce law,  so  long  as  i  l  law  is  enforced  against  the  rail- 
ro.'vls.  It  should  be  fnnh<  r  made  legal  for  the  rail  lines 
to  enter  with  such  water  ca  vjers  nto  joint  traffic  arrange- 
Mieuts  for  the  purpose  of  uv  >idiug  demoralization  of  the 
transportation  and  com  erci«i  interests  involved;  the  law 
to  ^rant  the  cat  lers  \  rmiss  on  to  pool  and  equitably 
divide  their  earnings  on  lin:  ir.    ic  if  necessary. 

Having  thus  affi)rded  ^  "  an  rail  carriers  a  much 
r  ^>eded  and  proper  relief  asteful  and   unjustifiable 

competition  with  each  oth  >i  ith  inexpensive  carriers 
over  water-ways  which  cot  nothing  to  maintain,  such 
competition  being  admitted  iiurtful  alike  to  the  shipper 
and  the  carrier,  I  would  th-  h^'  treaty  and  legislation 
provide  and  enforce  that  the  -sates  charged  by  American 
roads  on  United  States  or  in  mational  traffic  should  be 
the  minimum  which  the  foreigi  competitor  may  accept  on 
the  sai  le  traffic,  and,  if  needful,  would  permit  the  Amer- 
ican lines  to  enter  into  a  pool  *"  earnings  with  their 
competitor. 

Experience  has  demonstrated  that  pools  protect  not 
onl>  the  carrier,  but  the  shipper  as  well;  and  I  cannot  too 
strongly  recommend  that  this  matter  be  carefully  and 
thoroughly  considered  by  Congress,  as  tending  to  promote 
the  best  interests  of  the  shipper  and  the  carrier. 

Having  referred  briefly  to  the  effect  of  the  operation  of 
the  Canadian  railroads  and  steamship  companies  upon  the 
business  of  the  United  States  railroads  and  steamship 
lines  upon  the  Pacific,  and  the  partial  remedy  suggested 


I" 

I 
111'  I 


ii'iii 


III 


II 


to  place  them  more  nearly  on  an  equality  in  competing  for 
through  traffic  with  foreign  lines,  I  would  say  it  seems  to 
me  that  the  American  Steamship  lines  are  placed  at  such 
a  great  disadvantage  that  Congress,  in  its  united  wisdom, 
should  pass  a  law  to  assist  the  American  mercantile  steam- 
ship lines  by  offering  as  liberal  compensation  for  the  trans- 
portation of  mails  as  foreign  Governments  bestow  on 
their  carriers,  and  as  most  notedly  is  done  by  that  great 
maritime  nation  of  the  world,  Great  Britain,  which  is 
rapidly  encroaching  upon  the  rights  of  the  citizens  of  our 
Republic. 

1 6.  State  any  further  matter  which  occurs  to  you  perti- 
nent to  the  subject  upon  which  you  have  been  examined. 

A. — I  would  respectfully  submit  to  your  honorable  com- 
mittee that,  while  the  damage  already  done  to  American 
transportation  interests  by  Canadian  carriers  is  sufficiently 
serious  in  itself,  it  is  trifling  in  comparison  to  the  damage 
likely  to  be  inflicted  by  our  Canadian  competitors  in  the 
future,  because  of  the  unique  position  they  occupy  as 
against  American  carriers.  Their  influence  on  American 
traffic  is  already  pronounced  and  conspicuous,  and  it  would 
not  be  unnatural  if,  emboldened  by  their  past  success  in 
capturing  that  which  the  American  lines  have  built  up  and 
heretofore  held,  they  would  in  future  become  more  aggres- 
sive, seeing  that  they  command  the  valuable  local  traffic 
of  a  vast  domain,  the  earnings  from  which  are  absolutely 
unaffected  by  any  rates  they  choose  to  make  to  secure 
American  tonnage,  however  low  they  may  deem  it  neces- 
sary to  make  those  rates. 

By  its  charter  the  Canadian  Pacific  Railway  was  given 
the  sole  right  to  operate  or  construct  railroads  west  of 
Ontario.  How  valuable  this  right  is  deemed  by  that  com- 
pany and  the  Dominion  Government  may  be  gleaned  from 
the  circumstance  that,  when  the  province  of  Manitoba 
revolted  against  that  concession,  so  far  as  it  was  concerned, 
the  Dominion  Government,  in  consideration  of  the  com- 


25 


ting  for 
Jems  to 
at  such 
Arisdom, 
e  steam- 
le  trans- 
itow  on 
at  great 
rhich  is 
s  of  our 

3U  perti- 
mined. 
ble  com- 
.merican 
Eficiently 
damage 
rs  in  the 
:cupy  as 
merican 
t  would 
ccess  in 
t  up  and 
aggres- 
1  traffic 
[solutely 
secure 
t  neces- 

is  given 
Iwest  of 
lat  com- 

id  from 
lanitoba 
jcerned, 

le  com- 


pany relinquishing  that  provision  of  its  franchise  for  a 
portion  of  Manitoba,  guaranteed  the  interest  at  three  and 
a  half  per  cent  on  bonds  amounting  to  $15,000,000,  pay- 
able in  fifty  years.  The  Canadian  Pacific,  through  this 
provision  of  its  charter,  stands  without  danger  of  a  rival 
west  of  Ontario  for  twenty  years. 

The  total  expenditure  by  the  Dominion  Government  on 
the  Canadian  Pacific  Railway  to  June  30,  1887,  was  over 
$60,000,000,  in  itself  an  unparalleled  endowment,  inde- 
pendently of  the  extraordinary  franchise  and  lavish  grants 
of  land  bestowed  on  that  company.  The  splendor  of 
these  concessions  must  not  cause  us  to  overlook  other 
privileges  most  important  in  the  construction  and  mainte- 
nance of  a  trans-continental  railway,  such  as  importation 
duty  free  of  steel  rails  and  other  material  used  in  construc- 
tion of  the  rail  and  telegraph  line,  and  freedom  of  the 
railway  from  taxation  forever. 

Contrast  with  this  the  conditions  under  which  the  Ameri- 
can roads  exist — the  transcontinental  lines  competing  not 
only  with  each  other  and  with  the  ocean  lines  in  endeavor- 
ing to  secure  overland  traffic,  but  being  compelled  to 
compete  also  against  that  foreign  line  which  has  no  vital 
interest  or  tangible  responsibility  dependent  on  its  conduct 
of  American  traffic.  Even  were  its  through  and  local 
business  interdependent  and  subject  to  the  control  of  our 
Government,  as  in  the  case  of  American  lines,  it  should 
be  observed  that  the  fixed  charges  for  interest  on  the  funded 
debt  of  the  Canadian  Pacific  Railway  averaged  $655.28 
per  mile,  according  to  poor's  Manual  for  1888  ;  whereas 
the  average  interest  on  the  funded  debt  alone  of  the  com- 
bined railroads  of  the  United  States  is,  according  to  the 
same  authority,  $1,33246  per  mile,  and  the  average  taxes 
(per  last  United  States  census)  of  those  railroads  $151.33 
per  mile,  making  a  total  of  $1,483.79  per  mile.  Thus  the 
fixed  charges  per  mile  of  the  Canadian  Railway  in  these 
particulars  are  but  44  per  cent  of  like  charges  to  be  met 

I 87G93 


OFinifflSGH  LiLriASy 


;  iiiliii! 


'  iii 


III! 


■'Ill   I 

ill 


'^  I 


I  I 


' 


26 

by  the  United  States  roads.  It  will  be  noticed,  therefore, 
that  to  meet  vital  financial  obligations — the  failure  to  do 
which  would  be  disastrous  alike  to  the  railroads  and  the 
general  public,  and  would  admittingly  be  against  public 
policy — it  is  necessary  that  the  American  roads  earn  I2.25 
per  mile  for  each  dollar  the  Canadian  Pacific  is  required  to 
earn.  In  the  general  average  thus  given  for  the  combined 
roads  in  the  United  States,  the  vast  and  inexpensive 
mileage  of  the  roads  constructed  in  the  great  plains  and 
valleys  of  the  East  is  included  with  the  smaller  mileage 
of  the  roads  west  of  the  Missouri  river,  constructed  through 
mountainous  and  comparatively  sparsely  settled  districts 
where  the  cost  of  construction  and  maintenance  is  high; 
and  I  may  add  that  it  is  upon  the  latter  the  great  burden 
of  conflict  with  our  Canadian  Pacific  competitor  falls. 

While  referring  to  these  latter  roads,  I  would  call  your 
attention  to  the  great  contrast  between  the  privilege 
granted  the  Canadian  Pacific  of  importing  their  material 
duty  free,  and  the  restrictions  laid  on  the  Central  Pacific 
Railroad,  for  example,  which  was  built  under  the  eye  of 
this  Government  and  was  expressly  restrained  from  avail- 
ing itself  of  the  cheaper  markets  of  the  world.  It  could 
not  buy  its  iron  or  rails  in  Wales  or  Belgium  ;  it  could  not 
ship  its  material  to  San  Francisco  under  a  foreign  flag ;  it 
was  forced  to  purchase  American  rails  at  an  average  of 
over  $80  per  ton,  while  foreig^n  rails  could  be  purchased  at 
an  average,  including  duty,  of  ^50  per  ton  ;  it  was  forced 
to  pay  $17.50  per  ton  for  freight  from  New  York  to  San 
Francisco,  when  it  could  have  shipped  from  Cardiff  to  San 
Francisco  for  less  than  $10;  it  was  forced  to  pay  a  war 
insurance  for  freight  thus  shipped  under  the  American 
flag  as  high  as  1 7  per  cent,  when  the  same  goods  could 
have  floated  under  the  English  flag  for  less  than  3  per  cent. 
On  many  locomotives  it  purchased  there  was  a  war  tax 
paid  to  the  Goverument  of  $960  each.  .  •  -' 


27 


herefore, 
ure  to  do 
s  and  the 
St  public 
irn  $2.25 
iquired  to 
combined 
sxpensive 
lains  and 
r  mileage 

1  through 
.  districts 

2  is  high; 
it  burden 
falls. 

call  your 
privilege 
r  material 
al  Pacific 
;he  eye  of 
im  avail- 
It  could 
;ould  not 

flag;  it 
erage  of 
ihased  at 
las  forced 
k  to  San 
flf  to  San 
|ay  a  war 

merican 

s  could 
|per  cent. 

war  tax 


What  wonder,  then,  that  this  company  and  other  Amer- 
can  lines,  all  dependent  on  their  earning  power  for  capacity 
to  meet  their  financial  obligations,  should  view  with  mis- 
giving, not  to  say  with  alarm,  the  encouragement  of  their 
Canadian  rival,  which  has  been  indulgently  nursed  into 
vigorous  life  by  a  foreign  Government,  and  whose  object 
is,  by  the  use  of  Government  subsidies  on  land  and  sea,  to 
divert  American  commerce  from  American  ocean  and  rail 
transportation  lines;  nor  are  the  transportation  lines  alone 
interested.  This  diversion  affects  every  seaport  from 
which  the  business  is  diverted,  and  every  town  and  city 
which  the  traffic  ceases  to  traverse  when  diverted  to  Cana- 
dian lines.  It  cannot  even  be  said  in  mitigation  that  con- 
sumers are  benefited  by  the  diversion;  for  it  is  obvious 
that,  except  on  raw  materials,  the  cost  of  transportalion 
enters  but  slightly  into  the  price  the  consumer  pays  for 
any  commodity;  while  on  articles  of  general  consumption 
the  cost  of  transportation  is  almost,  if  not  altogether,  im- 
perceptible. 

Therefore  it  would  seem  to  be  the  first  duty  of  this 
Government  to  adopt  such  measures  as  may  be  necessary 
to  protect  and  foster  its  own  vast  and  important  commer- 
cial interests,  no  longer  indulging  the  apathy  which  is  so 
well  calculated  to  further  the  ambitious  schemes  of  our 
foreign  neighbors,  who  are  striving  to  wrest  from  us  com- 
merce rightfully  our  own. 


SUPPLEMENTAL. 

The  liberty  you  gave  me  in  your  sixteenth  inquiry 
regarding  our  relations  with  Canada,  ' '  State  any  further 
matter  which  occurs  to  you  pertinent  to  the  subject 
upon  which  you  have  been  examined,"  prompts  me  to 


i      I 


a8 


IM    I 


ii  I 


UK  I  I 


mm 

pit. IN,   ' 

IllUBIl  ' 


I    I 


supplement  the  foregoing  answers  with  some  observations, 
reflections  and  suggestions.  I  do  this  with  the  assurance 
of  your  permission  and  the  hope  that  you  will  pardon  me 
for  further  reference  to  the  subject  of  rail  and  waterways 
in  the  United  States  and  their  relations  with  those  of 
Canada. 

That  the  United  States,  under  a  system  protective  of 
our  industries,  has  prospered  in  a  greater  degree  than  the 
people  of  any  other  time  or  nation  is  universally  conceded. 
Great  Britain,  on  the  other  hand,  largely  depending  for 
her  prosperity,  as  a  free-trader,  on  a  share  in  the  com- 
merce of  the  world,  was  thwarted  in  her  designs  and 
hopes  by  the  result  of  our  last  election,  which  decided 
the  issue  that  seemed  so  threatening  to  our  commerce  and 
industries,  and  finally  settled  the  future  policy  of  the 
United  States.  By  voice  of  the  people,  Protection 
was  the  banner  to  be  hung  upon  the  outer  walls,  and 
which  was  unfurled  on  the  East,  South  and  West ;  but  on 
the  North,  forsooth,  the  greatest  of  commercial  powers  is 
left  free  to  prey  upon  our  border  and  enjoy  the  fruits  of  a 
policy  calculated  to  enrich  its  people  and  Government  at 
the  expense  of  our  own.  I  refer  to  the  result  of  the 
election  not  in  a  partisan  spirit,  but  merely  as  illustrating 
the  temper  of  the  American  people  on  the  subject. 


ijilll 


Canadian  Pacific   Railway    Inimical  to  American 

Interests. 

The  most  subtile  instance  of  England's  movements 
for  the  maintenance  of  commercial  supremacy,  the  inva- 
sion of  American  commerce,  and  the  absorption  of  the 
benefits  of  American  prosperity,  is  found  in  the  Canadian 
Pacific  Railway  and  its  steamship  lines.  Not  only  has  this 
road,  with  its  cheap  construction  and  equipment,  its  cheap 
labor    and  bounteous  Government  assistance,  already  cut 


rvations, 
ssurance 
rdon  me 
aterways 
those  of 

;ctive  of 
than  the 
onceded. 
idiiig  for 
the  com- 
gns    and 

decided 
lerce  and 
y  of  the 
)TECTlON 
alls,  and 
; ;  but  on 
powers  is 

nits  of  a 
liment  at 
It   of  the 

istrating 


[ERICAN 

Ivements  ' 
he  inva- 
of  the, 
Canadian 
I  has  this 
Its  cheap 
[ady  cut 


29 

largely  into  a  carrying  trade  that  rightfully  belongs  to 
the  United  States,  but  it  is  steadily  reaching  forth  to 
seize  more. 

The  President  of  the  Canadian  Pacific  Railway  is  re- 
ported to  have  said  that  his  company  was  getting,  at  the 
present  time,  about  ten  per  cent  of  the  entire  trans-conti- 
nental traffic.  Since  this  gentleman  is  reported  to  have 
admitted  that  this  amount  represented  only  about  four  pei 
cent  of  the  entire  traffic  of  his  company,  it  is  evident 
that  this  great  subsidized  and  foreign  corporation  can 
affijrd  to  force  the  rates  down  far  below  the  cost  of 
carriage,  thus  dictating  the  rates  at  which  the  roads  of 
the  United  States  must  accept  the  remaining  ninety  per 
cent  of  the  traffic  —  naturally  theirs  —  or  abandon  the 
business.  Ten  per  cent  of  the  traffic  may  not  seem  large 
to  the  casual  observer ;  but  it  should  not  be  forgotten  that 
the  taking  of  a  tenth  at  a  non-paying  rate  would  of  itself 
do  little  or  no  harm  to  that  company — not  burdened  with 
as  heavy  responsibilities  as  the  American  trans-continental 
lines  and  having  a  valuable  local  business  ;  but  it  fixes 
the  rates  for,  say,  one-third  of  the  entire  traffic  of  com- 
peting American  lines  at  which  they  must  accept  the 
business  or  surrender  to  the  foreign  carrier,  which  pays 
out  no  money  to  our  people,  owes  no  allegiance  to  this 
country,  and  of  course  is  not  compelled  to  respect  the 
strict  and  binding  laws  enforced  upon  the  American 
carriers. 

This  impending  danger  to  our  industries  and  enter- 
prise and  this  curious  feature  of  protection,  which  has 
not  yet  attracted  the  attention  it  merits,  should  engage 
the  earnest  consideration  of  Congress. 

We  have  before  us,  too,  the  example  of  our  mercantile 
marine,  wherein  it  will  be  found  that  in  1855,  American 
vessels  carried  75^  per  cent  of  our  exports  and  imports, 
while  in   1861  we  carried  but   661^  per  cent ;  after  the 


30 


'•  illliiiai; 


ordeal  of  the  civil  war  in  1865  we  carried  but  28  per  cent, 
and  for  the  fiscal  year  ending  June  30th,  1888,  some- 
thing less  than  14  per  cent.  This  decline  of  the  Amer- 
ican foreign  carrying  trade  has  occurred,  too,  in  the  face 
of  a  marvelous  growth  in  our  foreign  commerce,  and 
hence  leads  to  the  inevitable  conclusion  that  foreign  ves- 
sels have  taken  the  traffic  from  us.  Proof  that  they  have 
is  to  be  found  in  the  fact  that  our  ship-building  for  the 
foreign  carrying  trade  has  likewise  steadily  declined  "until 
in  the  fiscal  year  ending  June  30th,  1888,"  to  use  the 
language  of  the  Hon.  Nelson  Dingley,  Jr.,  member  of 
Congress  from  Maine,  in  an  able  paper  on  this  subject: 
'  'there  was  not  one  ship,  and  but  few  other  vessels,  built  in 
this  country  for  the  foreign  trade."  This  result  has  been 
brought  about  by  placing  our  ships  in  unequal  com- 
petition with  their  British  rivals,  which,  constructed 
where  money  is  cheap,  where  coal  and  iron  are  procured 
at  a  minimum  expense,  and  skilled  artisans  receive  but 
meager  remuneration  for  their  labor,  can  be  launched  at  a 
cost  far  below  ours,  and  are  then  manned  by  officers  and 
seamen  whose  scale  of  compensation  ranges  low.  Thus  in 
operation  under  advantages  not  enjoyed  by  our  vessels,  they 
further  receive  financial  aid  from  their  Government  where- 
ever  new  commerce  is  sought  to  be  developed,  or  it  is  seen 
that  competition  can  be  broken  down.  Our  ships,  on  the 
other  hand,  are  more  expensive  carriers  by  reason  of  the 
higher  cost  of  all  that  enters  into  their  construction  and 
operation,  chief  among  which  is  the  higher  cost  of  Amer- 
ican labor,  whose  wages  we  should  seek  to  maintain  in 
the  interest  of  universal  prosperity.  The  hesitancy  of 
our  Government  toward  aiding  any  private  or  quasi  private 
enterprises  has  further  handicapped  us  by  depriving  Amer- 
ican ships  of  the  financial  aid  Great  Britain  is  accustomed 
to  render  her  carriers  and  ship-builders.  As  a  natural  con- 
sequence of  sucb  unequal  conditions,  the  American  foreign 


31 


carrying  trade  has  become   diverted  almost  wholly  from 
American  to  foreign  vessels.     What  a  happy  contrast  is 
presented  by  our  domestic  shipping,  which  has  prospered 
during  the  very  period  our  foreign  carrying  trade  steadily 
declined.     The  cause  is  not  far  to  seek.     Our  navigation 
laws  restrict  our  domestic  commerce  to  American  vessels^ 
which,  thus  protected  from  unequal  competition  with  foreign  \ 
carriers, occupy  their  natural  sphere  with  profit  to  themselves 
and  benefit  to  the  people.  Since  the  charges  for  such  trans- 
portation but  remotely  affect  the  consumer,  and  in  articles 
of  consumption  are  imperceptible  to  them,  it  follows  that 
the  small  additional  fraction  American  craft  might  charge 
would  be  unnoticed  and  insignificant  to  the  people  while 
constituting  to  the  carriers  the  difference  between  work- 
ing at  a  profit  or  being  driven   out  of  the  trade.     Howy 
different  had  been  the  fate   of  our  domestic  shipping  if 
left  to  struggle  against  the  competition  of  foreign  craft,  is 
not  a  matter  of  idle  conjecture  but  of  knowledge  founded, 
as  we  have  seen,  on  sad  experience. 

Apply  the  same  principles  to  Lhe  transportation  of 
American  traffic  by  rail  as  have  thus  affected  the  American 
shipping  trade,  and  like  results  may  reasonably  be  looked 
for.  Introduce  the  competition  of  foreign  railroad  lines 
constructed  under  signally  favorable  conditions  which,  for 
example,  render  it  needful  for  them  to  earn  but  one 
dollar  to  meet  their  fixed  charges  where  the  average 
American  road  has  to  earn  two  dollars  and  twenty-five 
cents;*  operating  under  lax  responsibilities  which  pennit 
them,  if  they  please,  to  carry  trans-continental  traffic  from 
State   to   State  of  our  nation  at  rates  below  the  cost  of 

carriage,  without    perceptibly    affecting    their    finances ; 
enable  them  to  continue  this  until  they  practically  drive 

the  American  roads  out  of  the  through  business,  and  it 


*  See  my  answer  to  Question  i6  cf  Senate  Committee. 


,||MHItMMMiAlH 


'el;  I 


i'»«5  { 1 


3a 

will  be  seen,  when  perhaps  it  is  too  late,  that  foreign 
enterprise  has  been  nnrtured  at  the  expense  and  by  the 
sacrifice  of  American  interests.  Our  navigation  laws  re- 
strict our  domestic  commerce  to  American  vessels.  Why 
should  our  laws  not  proceed  on  the  same  lines  to  restrict  our 
domestic  railway  transportation  to  American  rail  carriers? 
Who  can  contend  that  American  prosperity  has  been  fur- 
thered by  the  ruinous  competition  to  which  our  merchant 
marine  in  the  foreign  trade  has  succumbed  ?  Or  who  will 
contend  that  our  prosperity  has  been  checked  by  preserving 
our  domestic  water  transportation  for  American  vessels?  As 
futile  is  it  to  argue  that  in  railway  transportation  unequal 
competition  benefits  American  interests,  or  contrariwise 
that  the  protection  of  American  railways  against  foreign 
aggression  will  be  a  hindrance  to  the  prosperity  of  the 
American  nation. 

The  Protective  System  should  Apply  to  Trans- 
portation. 

According  to  the  last  census  report  (1880),  the  capital 
invested  in  manufactures  (including  petroleum  refining, 
mining  industries  and  fisheries,  but  not  including  value  of 
product  of  hand  trades,  as  carpenters,  masons,  blacksmiths, 
and  others  working  singly,  or  the  statistics  of  gas  manu- 
facturing or  manufacturing  by  steam  railroads,  which  two 
industries  last  named  are  not  summarized  in  copy  of  census 

reports  at  hand)  was $2,817,598,352 

Numberof  hands  employed 3,108,118 

Total  wages  paid  during  the  year  .  .  .  .  $  952,335,367 
Value  of  products $5,430,821,082 

Capital  invested  and  total  wages  paid  in  mining  indus- 
tries and  fisheries  are  also  omitted  from  the  census  reports; 
but  this  amount,  whatever  it  may  be,  is  probably  so  small 
as  not  to  materially  affect  any  comparisons. 


breign 
by  the 
iws  re- 
Why 
ict  our 
irriers? 
en  fur- 
:rchant 
ho  will 
serving 
;ls?  As 
mequal 
rariwise 
foreign 
of  the 


Trans- 

capital 
efining, 
I'alue  of 
;siniths, 
manu- 
ich  two 
F  census 

598,352 
08,118 

335,367 
821,082 

indus- 
reports; 
o  small 


33 

According  to  reliable  estimates,  the  total  railroad  mile- 
age in  the  United  States  at  the  end  of  the  year  1888  was 
abou  54,000  miles,  and  the  number  of  railroad  adult 
employes  is  probably  not  less  than  850,000,  representing 
a  population  of  nearly  six  millions,  one-tenth  the  entire 
inhabitants  of  the  United  States,  who  are  entitled  to 
protection.  But  as  no  reliable  statistics,  either  for  manu- 
factures or  railroad  operations,  appear  to  be  available  for 
the  years  1887  or  1888,  we  will  confine  the  comparisons  to 
1880.  In  1880,  then,  the  total  number  of  miles  of  road 
in  the  United  States,  according  to  the  last  census  report, 
was  87,701  miles;  the  total  cost  of  these  roads  was  as 
follows: 

Construction  of  road      14,112,367,175 

Equipment , 418,045,458 

Lands      103,319,845 

Telegraph  lines  and  miscellaneous .    .       204,913,195 

Total .$4,838,645,673 

The  gross  earnings  for  the  year  1880  were  $580, 4  50, 594; 
operating  expenses,  not  including  interest  on  invested 
capital,  $352,800,120. 

It  will  be  noticed  that  general  manufacturing,  requiring 
an  investment  of  less  than  $3,000,000,000  of  capital,  turned 
out  products  to  the  total  value  of  nearly  $5,500,000,000, 
nearly  all  of  which  is  moved  by  the  railways ;  while,  on 
the  other  hand,  nearly  $5,000,000,000  of  capital  invested 
in  railroads  produced  as  gross  earnings  from  that  of 
which  they  have  to  sell,  viz.,  Transportation,  less 
than  $600,000,000.  It  will  further  be  noticed  that 
there  was  71.7  per  cent  more  capital  invested  in 
railroads  (no  less  important  to  the  interests  of  the 
country)  than  in  manufacturing  operations  for  the 
year  1880;  and  it  is  probable  this  percentage  is  very 
considerably   larger   at    the   present    time,    as   uudoubt- 


34 


ii!..:.. 


"  "K^i; 


If  I 


cdly  the  investment  of  capital  in  railroads  has  been  pro- 
portionately much  greater  than  similar  investments  in 
manufacturing  industries.  These  wage-earners  in  the 
railroad  service,  as  well  as  the  shareholders  and  the  pur- 
chasers of  our  railroad  securities,  are  as  much  entitled  to 
adequate  protection  as  are  the  workers  in,  and  owners  of, 
other  property  in  whatsoever  form.  Grant  protection  to 
the  manufacturer  and  the  producer,  and  it  must,  on  similar 
equitable  grounds,  be  extended  to  the  railway  interest. 
While  all  else  is  or  has  been  protected  against  undue 
foreign  competition,  the  railroad  industry — one  of  the 
foremost  of  the  country — railroad  capital,  railroad  invest- 
ment and  all  railroad  interests  have  been  not  only  ignored 
but  put  as  it  were,  under  a  ban,  and  made  the  victim  of  a 
system  which  the  railroads  themselves  have  been  so  often 
accused  of  pursuing,  to  wit: 

UNJUST   DISCRIMINATION. 

Such  discrimination  consists  in  this:  That  while  all 
other  industries  are  encouraged  and  protected  against 
foreign  competition,  railroad  enterprises  are  hampered 
by  unwise  and  prejudiced  legislation,  too  often  instigated 
by  a  false  and  ill-advised  public  clamor.  Hence  we  find 
our  great  system  of  trans-continental  railways  forced  into 
an  unequal  competition  with  a  foreign  system.  And 
forced  by  what  ?  Not  by  the  natural  advantages  of  our 
rival,  but  by  arbitrary  and  oppressive  legislation  by  our 
own  people, — legislation  which  could  not  have  been 
more  effective  to  this  end  if  actually  conceived  and  ex- 
ecuted in  behalf  of  our  Canadian  competitor.  This  com- 
petitor meanwhile  is  not  only  necessarily  free  and  in 
reality  untrammeled  of  Governmental  supervision  and 
action,  but  is  fostered,  subsidized,  aided  and  financially 
indorsed  by  its  Government  in  all  its  efforts  to  wrest  away 


35 


Anit .  ican  comMMIi'  "^c  Air  lean  transportation  com- 
panies competing  wit'  it  are  Jer  Gi)\eTnniental  control 
and  severe  regulation,  wkich  s.  o»isly  impair  their  ability 
to  resist  the  foreign  agf«M«ion  This  Governmental  con- 
trol is  not  only  exercised  by  the  Federal  Government,  but 
it  is  claimed  and  pursued  by  the  States  of  our  Union,  by 
the  counties  of  the  States  and  the  municipalities  within 
the  counties,  thus  subjecting  the  railway  corporation  to  four 
separate  and  distinct  powers  of  regulation.  Such  injurious 
regulation  not  only  affects  the  invested  capital,  but  reacts 
on  the  people  at  large  by  needlessly  interfering  with  the 
public  usefulness  of  such  corporations. 


The  "  Long  and  Short  Haul  Ci^ause"  of  the  Inter- 
state Commerce  Law  Should  be  Repealed. 


If  in  connection  with  this  subject  I  should  be  asked  to 
suggest  a  method  for  improving  the  position  of  American 
railroads  in  their  competition  with  foreign  carriers,  I  would 
as  a  first  step  point  to  the  Interstate  Commerce  Law  and 
would  do  so  not  as  a  captious  critic,  impatient  of  Govern- 
mental control, — for  while  it  is  the  law  of  the  land  I  shall 
yield  to  no  one  in  the  desire  to  faithfully  follow  its  spirit, — 
but  as  one  whose  life  has  been  spent  in  the  handling  of  rail- 
way transportation  and  the  practical  rather  than  theo- 
retical solution  of  railway  problems. 

It  is  not  to  be  wondered  at  that  this  Government,  in  its 
initial  attempt  to  regulate  our  internal  railway  communi- 
cation, and  basing  that  attempt  for  the  most  part  on  foreign 
models  of  very  limited  application,  should  further  uninten- 
tionally complicate  the  relations,  already  delicate,  between 
the  people  and  the  carriers.  All  practical  railway  students 
foresaw  that  some  of  the  theories  embodied  in  the  regulat- 
ing law  must  prove  a  barrier  to  the  more  extended  usefulness 
of  the  roads  as  public  servants;  and,  the  law  having  now 


?i 


received  a  fair  trial,  it  has  become  the  -settled  belief  of 
the  great  majority  of  railroad  mauaj^ers  .md  economists, 
concurred  in  by  well-known  commercial  men  of  broad 
experience  and  ripe  judgment,  that  at  least  one  sec- 
tion of  the  Interstate  Commerce  Law  can  be  materially 
modified  without  endangering  or  embarrasing  any  interest. 
Indeed,  it  becomes  a  grave  question  wliether  the  greatest 
good  to  all  would  not  be  best  subserved  by  its  elimination 
from  the  law.  That  section  is  the  fourth  of  the  act,  and 
is  commonly  known  as  the  "Long and  Short  Haul  Clause." 
It  cannot  be  disputed  that  uniformity  of  regulation,  without 
corresponding  uniformity  of  condition,  will  necessarily  be 
a  failure  because  founded  on  a  fallacy,  since  all  just  regu- 
lation must  have  reference  to  the  condition  which  makes 
it  necessary  or  advisable.  Completely  or  even  approxi- 
matety  analogous  conditions  cannot  exist  over  the  wide 
area  of  our  country,  which,  although  under  the  same  Gov- 
ernment, presents  contrasting  and  sometimes  perplexing 
physical  characteristics,  with  resources  and  products  as 
varied  as  might  be  found  in  the  combined  area  of  many 
empires.  Governmental  regulation,  to  be  efficient,  must 
therefore  be  so  readily  adaptable  that  the  reason  claimed 
as  calling  forth  the  regulation  shall  have  complete  justifica- 
tion in  the  condition  to  which  such  regulation  is  addressed. 
This  Interstate  question  was  before  Congress  and  under 
discussion  some  nine  years.  The  movement  was  started 
the  year  following  the  well-known  decision  of  the 
U.  S.  Supreme  Court,  in  the  "Granger"  cases.  The 
agitation  grew  out  of  the  anti-railroad  craze  of  those  days, 
from  which  such  State  enactments  as  the  Potter  Law 
resulted,  under  which  trade  was  so  much  disturbed 
and  perplexed  as  to  compel  its  repeal  after  a  short  trial. 
Early  anti-railroad  extremists  did  not  find  an  easy  solution 
of  the  complicated  questions  of  railroad  policy.  They 
passed  laws  without  regard  to  commercial  results;  and 
contrasts  were  never  more  manifest  between  theory  and 


37 


ilief  of 
omists, 

broad 
ne  sec- 
terially 
uterest. 
greatest 
lination 
ct,    and 
:iause." 
without 
jarily  be 
ist  regu- 
i  makes 
approxi- 
the  wide 
me  Gov- 
rplexing 
(ducts  as 
of  many 
nt,  must 
claimed 
justifica- 
ddressed. 
nd  under 
.s  started 

of  the 
es.  The 
ose  days, 
Iter  Law 
disturbed 
lort  trial. 

solution 

.  They 
lilts;  and 
leory  and 


y 


practice  than  between  the  provisions  of  those  laws  and  the 
facts  which  enter  into  the  business  principles  of  railroad 
management. 

Following  in  this  line  of  political  tradition,  it  is  not 
strange  that  Congress,  in  its  attempt  at  regulation, — guided 
by  the  light  of  previous  experiments  of  very  limited 
range  and  by  the  information  gleaned  from  the  in- 
adequate testimony  of  railroad  officials  whose  experi- 
ence was  connected  with  the  old  thickly  settled  and 
rich  manufacturing  sections  of  the  country,  with  but 
slight  regard  to  the  South  and  the  vast  territory  west  of 
the  Mississippi, — should  pass  a  law  not  wholly  practicable 
or  adapted  to  the  dissimilar  circum?^  'ices  and  varied  con- 
ditions surrounding  railroad  op  •  '  .(  <^'.e  different  sec- 
tions of  the  country. 

The  tariffs  in  existence  at  the  time  the  Interstate  Law 
took  effect,  covering  all  the  railroads  and  water-ways, 
were  not  the  result  of  mere  guesswork,  but  came  from 
two  generations  of  experience  and  actual  practice,  and 
were  of  natural  growth,  being  devised  to  bring  the  pro- 
ducer and  consumer  together,  to  their  mutual  advantage, 
however  distant  they  might  be.  Considering  this  work 
from  a  national  standpoint,  railroad  rates  were  thus 
reduced  to  a  figure  unequaled  elsewhere,  stimulating  the 
most  wonderful  national  development  mankind  has  ever 
known. 

The  traffic  managers,  in  making  their  schedules,  which 
were  accompanied  by  such  satisfactory  results,  found  that 
the  country  was  so  large,  its  topography  and  resources 
so  varied,  its  commercial  relations  so  complex,  and 
the  railroad  interests  generally  so  diversified,  that  to 
arbitrarily  measure  and  bind  them  by  rules  which 
in  practice  would  be  found  fixed  and  unyielding, 
must  seriously  impair  the  public  usefulness  of  railway 
operations.     These   traffic   officers,   by   business   training 


!  HW 


!  !i;. 


i 


38 

and  the  comprehensive  information  derived  from  long 
experience,  understand  the  laws  and  currents  of  our 
trade  and  commerce;  thoroughly  acquainted  with  the 
resources  tributary  to  their  respective  lines  and  their 
relation  to  the  general  weal,  it  has  naturally  ever  been 
their  aim  to  adopt  such  a  basis  for  their  rate  schedules 
as  would  best  attain  those  prime  objects  of  railway  con- 
struction and  sound  operation :  first,  the  acquisition  of 
earnings  large  enough  to  adequately  remunerate  the  capital 
invested;  and  second,  to  that  end  the  fullest  natural  de- 
velopment of  all  resources  tributary  to  the  road,  and 
without  which  it  could  not  subsist  and  prosper.  TAese 
two  objects^  it  should  be  borne  in  mind^  are  inter- 
dependent and  always  uppermost  in  the  minds  of  railway 
managers^  however  the  difficulties  of  the  multifarious 
problems  to  be  solved  by  them  may  sometimes  obscure 
those  objects  from  the  superficial  observer.  It  is,  we 
believe,  the  popular  failure  to  perceive  this  potent  but 
subtle  fact  that  leads  to  legislation  of  the  kind  embodied 
in  the  fourth  section  of  the  Interstate  Commerce  Law, 
which  provides  that  under  substantially  similar  conditions 
it  shall  be  unlawful  for  a  carrier  to  charge  or  receive  any 
greater  compensation  in  the  aggregate  for  transportation 
for  a  shorter  than  for  a  longer  distance  over  the  same  line 
in  the  same  direction.  The  word  "  substantially,"  as  used 
in  the  law,  is,  I  may  observe,  most  delusive,  and  in  the 
construction  so  far  placed  upon  it,  renders  it  a  matter  of 
the  utmost  hazard,  under  severe  civil  and  criminal  penal- 
ties, for  rail  carriers  to  construe  the  fourth  clause  as  other 
than  an  absolute  inhibition,  except  when  such  an  im- 
periously constraining  force  as  Cape  Horn  competition 
between  the  Atlantic  and  Pacific  Coasts  controls  their 
action. 

The  fourth  section  of  the  law  does  violence  to  the  very 
basis,  fiscal  and  commercial,  of  the  railway  system  of  the 
country,  seeking  to  displace  by  an  arbitrary  theory  the 


39 

results  of  practical  experience,  which  have  so  well  met 
the  needs  of  the  widely  diversified  growth  of  our  great 
Republic.  Were  the  maintenance  of  this  section  accom- 
panied by  any  tangible  advantages  to  the  business  world, 
to  compensate  for  its  disturbing  and  needlessly  restrictive 
functions,  I  could  watch  with  less  misgiving  what  devel- 
opments might  come.  On  the  contrary,  however,  I  feel 
bound  to  say  that  its  theory  is  mischievous,  the  expression 
of  its  intent  obscure,  and  its  practical  tendency  is  to  im- 
pede American  railroads  in  their  eiforts  to  retain  American 
traffic  as  against  their  Canadian  rivals.  Further  than  this, 
it  checks  railway  enterprise  in  reaching  out  for  new  mar- 
kets in  the  interest  of  commerce,  a  check  in  itself  hurtful 
as  much  to  the  public  as  to  the  railroads. 

The  Law  Should  Authorize  Raii^road  Co-operation. 


There  is  another  matter  of  great  importance  regarding 
which  I  would  suggest  a  change,  if  I  should  be  asked  for 
a  furthe  method  of  improving  the  position  of  American 
railroads.  The  fifth  section  of  the  Interstate  Commerce 
Law  provides  : 

"That  it  shall  be  unlawful  for  any  common  carrier 
"  subject  to  the  provisions  of  this  act  to  enter  into  any 
"  contract,  agreement  or  combination  with  any  other  com- 
"mon  carrier  or  carriers  for  the  pooling  of  freights  of 
"different  and  competing  railroads,  or  to  divide  between 
"them  the  aggregate  or  net  proceeds  of  the  earnings  of 
"such  railroads,  or  any  portion  thereof." 

Experience  has  shown  that,  when  the  word  "pool" 
was  introduced  into  railroad  parlance,  a  great  mistake  was 
made;  for  the  public,  careless  of  distinctions  in  a  subject 
with  which  they  are  but  slightly  acquainted,  at  once  sur- 
mised that  a  railway  pool  had  some  sort  of  affinity  with  a 
pool  in  stocks  or  a  pool  on  a  race  track,  wherein  mystery, 


40 


f! 


K-.} 


chance  and  deceit  were  to  be  expected  and  were  us  lal 
accessories.  The  railway  pool  has  about  it  nothing  of 
mystery  or  chance,  but  is  a  plain  and  candid  business 
understanding  between  rival  transportation  companies, 
having  for  its  purpose  the  prevention  of  such  extreme 
competition  as  is  ruinous  to  the  railroads  and  at  the  same 
time  is  a  public  danger.  The  pool  is  intended  only  to 
regulate  competition.  The  very  basis  according  to  which 
the  earnings  of  the  pooled  roads  are  apportioned  should 
indicate  that  the  pool  is  not  intended  to  stop  competition. 
This  basis  is,  that  parallel  or  connecting  and  competing 
roads  shall  determine  among  themselves,  or,  failing  in  that, 
shall  decide  through  skilled  arbitrators  what  percentage  of 
the  total  tonnage  or  earnings  each  of  the  carriers,  operating 
in  a  certain  defined  territory,  would  be  likely  to  secure  at 
fair  and  steady  rates,  but  in  the  absence  of  unjust  discrim- 
minations  which,  in  some  forms  or  other,  are  always  the 
outgrowth  of  unrestricted  competition.  The  percentage 
determined  represents  the  share  of  the  traffic  the  respective 
carriers  shall  be  awarded  during  a  period  of  the  future 
as  may  be  decided.  Each  company,  it  is  true,  receives 
into  its  treasury  the  earnings  from  the  traffic  it  carries 
during  the  period  for  which  the  apportionment  was  made ; 
but,  as  soon  as  the  pool  accounts  can  be  balanced,  an 
adjustment  is  made  between  the  parties  by  payment  of 
equalizing  balances,  less  perhaps  a  certain  portion  of  the 
surplus  earnings,  which,  by  agreement,  may  be  retained 
by  the  disbursing  company  to  cover  the  cash  outlay 
incurred  iti  moving  the  surplus  traffic.  The  leading 
factor  in  thus  apportioning  the  business  among  the 
lines  interested  is  what  is  aptly  known  as  "the  record 
of  the  past;"  the  proportion  each  carrier  should  have 
being  assumed  to  be  that  proportion  of  the  total  traffic  in 
question  which  it  secured  during  a  given  previous  period 
as  against  the  others  pooling.  The  next  factor  is  a  con- 
sideration  of  the  extent  to  which  the  amount  of  traffic 


41 


secured  by  each,  during  the  basing  period,  was  influenced 
by  unequal  rates  or  unfair  devices.  Preferential  rates  or 
devices  for  favored  shippers  cannot  exist  under  an  effective 
pool ;  and,  if  any  carrier  has  been  using  such  to  divert 
business  to  its  line,  this  fact  weighs  against  it.  Another 
factor  is  the  influence  for  injury  of  each  party  relatively  to 
the  other  or  to  all  ;  for  a  carrier  unable  to  secure  any  but 
an  insignificant  proportion  of  the  traffic  if  compelled  to 
use  fair  or  equal  rates,  and  having  at  the  best  but  a  small 
interest  in  traffic  of  great  importance  to  other  lines,  could 
utterly  demoralize  the  business  of  all  lines  by  simply 
cutting  the  rates  to  a  non-paying  figure  until  it  compelled 
a  recognition  of  its  power  to  inflict  damage. 

I  have  said  the  leading  factor  is  the  "record  of  the 
past."  This  is  true,  not  of  the  initial  apportionment  of  the 
traffic  only,  but  is  at  the  foundation  of  the  whole  fabric  ; 
for  the  pool  agreement  always  makes  provision  for  a  change 
in  the  percentages  of  apportionment  from  time  to  time, 
and  these  changes  are  based  on  the  same  considerations 
as  at  the  outset.  The  operation  of  the  pool  modifies 
that  factor  in  adjustment  to  which  I  have  alluded, 
namely,  the  influence  of  unequal  and  unfair  rates  and 
preferential  devices,  and  brings  into  still  more  prominent 
consideration  "the  record  of  the  past."  Every  subse- 
quent apportionment  must  of  necessity  be  based  on  the 
traffic  carried,  and  the  conditions  under  which  carried, 
by  each  party  to  the  pool.  It  can  readily  be  seen,  there- 
fore, that  the  more  steadily  the  pool  is  maintained,  and  the 
longer  its  duration,  the  more  strongly  must  the  record  of 
what  each  member  has  so  far  accomplished  in  securing 
business  come  into  prominence  as  the  leading  considera- 
tion in  such  apportionment.  Finally,  indeed,  the  obnoxious 
factor  referred  to  must  disappear  as  the  incentive  to  its 
continuance  is  removed.  Then  the  carrier  that  is  best 
equipped,  has  the  best  facilities,  whose  line  is  the  most 


42 


•I' 


i 


■  .  ■     X 


ili.;::;; 


I 


I   n 


attractive, ,  and  has  the  best  organization, — that  can,  in 
short,  give  ^Ae  best  value  for  the  money  and  has  the  best 
method  for  inducing  travel  and  securing  traffic,  is  the  one 
that  will  maintain  its  lead,  as  it  naturally  should  and  as  it 
would  under  competitive  conditions  in  any  other  business. 
I  trust  I  have  made  it  clear  that  when  transportation 
companies  thus  co-operate,  the  competitive  principle  is 
still  maintained.  The  competition  it  is  sought  to 
obviate  is  only  that  kind  which  is  ruinous  to  railroad 
interests,  and  in  the  light  of  all  experience  is  nothing 
less  than  folly.  In  mercantile  operations  the  conditions 
are  so  elastic  that  competition  is  rather  healthy  than 
injurious  ;  although  even  the  courts  have  frequently  recog- 
nized the  right  of  mercantile  co-operation  when  it  is 
limited  to  the  purpose  of  holding  competition  within  such 
bounds  as  to  prevent  disastrous  consequences.  In  mercantile 
enterprises  the  investment  is  not  fixed,  the  capital 
employed  is  variable,  the  expenses  nicely  adjusted  to  the 
fluctuating  requirements  of  the  establishment ;  if  one 
branch  of  the  business  is  unremunerative,  it  can  be  aban- 
doned and  the  capital  turned  into  more  profitable  branches 
or  perhaps  into  new  channels.  Reckless  competition  in  any 
commercial  sphere  ends  in  the  extinction  of  the  weakest, 
and  the  victory  of  the  strong.  With  railroads  it  is  not  so.  A 
railroad  has  but  one  branch  of  business  in  which  to  operate, 
namely.  Transportation.  Its  capital  is  sunk  in  the  railroad 
property,  and  cannot  be  withdrawn  to  seek  more  paying 
investment,  although  its  value  can  be  reduced,  and  indeed 
utterly  destroyed,  to  the  injury  of  every  one  connected  with 
the  road  or  its  interests.  The  larger  part  of  its  expen- 
ses are  fixed  and  do  not  fluctuate  with  the  volume  of  traffic 
or  earnings.  If  it  cannot  earn  enough  to  pay  its  fixed 
charges  over  and  above  the  expenses  of  actual  operation, — 
which  in  themselves  aggregate  very  large  amounts  on  any 
important  railroad,  and  are  in  the  main  to  directly  com- 


43 


pensate  labor, — then    there  remains    but    one    recourse, 
namely,  bankruptcy  for  the  road.     This  bankrupt  concern 
does  not  then  go  out  of  the  business  of  transportation,  but 
continues  in  it,  and  with   its  greater  financial  responsibil- 
ities repudiated  becomes  a  standing  menace  to  every  com- 
peting road  struggling  to  fulfill  its  obligations.     Thus  the 
value  of  the  property  of  one  road  being  destroyed,  every 
road  that  is  drawn   into    competition  with  the  wrecked 
concern  is  threatened  with  like  destruction  thereby.     The 
weak  thus  becomes  the  strong,  and  the  reverse  of  mercan- 
tile conditions  results.     Should  the  bankrupt  corporation 
fall  into  the  hands  of  stock  gamblers  or  railroad  wreckers, 
competing  roads  become  the  victims  of  their  machina- 
tions, and  properties  once  solvent  succumb  to  dishonest 
and  disastrous  competition.     Any   man  of  business  can 
perceive  the  force  of  this  argument.     To  realize  it  he  has 
but  to  ponder  on  the  prospects  of  his  own  success  in  a 
business  in  which  he  would   be  forced  to   compete,  and 
for  an  indefinite  period,  with  bankrupt  concerns  of  equal 
magnitude   permitted   to   continue   doing  business  on  the 
same  street  and  in  the  same  block. 

I  Sim  satisfied,  that  just  as  soon  as  this  subject  is  pop- 
ularly understood,  the  spirit  of  justice  and  fair  play  inher- 
ent in  American  character  will  manifest  itself  in  a  ready 
assent  to  the  legalization  of  pooling,  and  the  consequent 
modification  of  the  fifth  section  of  the  law.  No  serious 
injuiy  can  be  permitted  to  any  interest  of  the  nation  as 
vast  as  that  of  the  railroads,  without  reacting  injuriously 
on  the  public  credit;  and  if  railroad  property  cannot 
be  reasonably  protected  and  railroad  investments  be 
equally  secure  as  in  other  entei'prises,  the  result  must 
be,  sooner  or  later,  a  stagnation  in  railroad  building  such 
as  has  already  become  marked  in  some  of  the  States  where 
railroads  are    "regulated  to  death."     All  our  experience 


I 


m 


0r'WIIffi3Q2  LSEf^ 


mil 


Y 


44 

as  a  people,  however,  should  teach  us  that  to  stimulate 
the  extension  of  railroads  into  new  fields  is  the  proper  and 
paying  policy. 


t 


isn 


"Railroad  War"   Is  Not  Railroad  Competition. 

I  have  shown  that  when  railroads  are  in  a  pool  the 
competitive  principle  is  still  maintained,  and  going  farther 
than  this  feel  safe  in  asserting  that  the  true  competi- 
tive principle  is  maintained  more  thoroughly  and  health- 
fully under  such  regulation  than  when  each  carrier  acts  on 
its  own  behalf,  becoming  a  "  free  lance"  when  it  pleases, 
and  undertaking  reprisals  for  real  or  fancied  wrongs. 

The  popular  ideal  of  railroad  competition  is  ' '  railroad 
war;"  as  when,  for  instance,  in  1886,  all  lines  between 
St.  Paul,  Chicago,  St.  Louis  and  New  Orleans  on  the  one 
hand,  and  the  Pacific  Coast  on  the  other,  were  struggling 
for  supremacy  in  the  trade  interchanged  between  the 
Pacific  Slope  and  Eastern  cities;  or,  as  when  more  recently, 
the  Canadian  Pacific  Railway  declared  its  intention  of 
striving  with  American  lines  for  the  same  traffic,  and 
straightway  proceeded  to  make  good  its  avowal  by  cutting 
rates  below  anything  the  Americans  attempted  in  en- 
deavoring to  retain  the  traffic  developed  and  heretofore 
enjoyed  by  them. 

What  have  been  the  results  in  both  cases?  In  the 
former,  after  months  of  reckless  warfare,  during  which  the 
most  conservative  roads  were  driven,  in  sheer  self-defense, 
to  meet  the  viciously  low  rates  of  reckless  competitors,  a 
truce  was  patched  up  and  efforts  made  to  resume  normal 
conditions.  This  was  not  done  until  millions  of  dollars 
had  been  wasted ;  yet  a  calm  survey  of  the  field  shows  that 
none  of  the  roads  gained  anything,  even  in  prestige, 
by  the  waste  of  resources  ;  and  this  notwithstanding  what 
might  be   termed  heroic  sacrifices  by   the    combatants, 


\s 


■I  ill 


45 


tonnage  being  sought  absolutely  regardless  of  the  compen- 
sation. To  cite  one  instance  of  the  latter,  I  may  mention 
that  many  carloads  of  Eastern  goods  were  brought  into 
California  at  rates  which  allowed  the  line  hauling  them 
only  three  cents  per  hundred  pounds  for  the  service  Kansas 
City  to  San  Francisco !  Under  such  conditions  rail- 
way interests  became  demoralized,  commercial  transactions 
developed  in  many  cases  into  mere  gambling  on  railroad 
rates;  shippers  were  not  less  demoralized  than  the  carriers; 
and  inequalities,  discriminations,  mutual  distrust  and 
universal  uncertainty  pervaded  all  transactions  in  which 
transportation  cut  an  important  or  perceptible  figure, 
direct  or  indirect.  The  vicious  public  policy  of  such 
ordeals  is  well  recognized  ;  while,  so  far  as  the  carriers  are 
concerned,  the  process  has  been  aptly  called  "railroad 
assassination."  In  the  case  of  the  Canadian  Pacific's 
declaration  of  hostilities  and  its  acts  in  pursuance  of  it, 
the  disaster  was  only  less  widespread  because  American 
roads  hesitated  to  engage  in  conflict  with  a  rival  having 
all  to  gain  and  nothing  to  lose  by  the  venture;  which, 
backed  by  an  empire,  reached  out  as  a  matter  of  national 
pride  and  national  aggrandizement  for  new  business  to 
which  it  had  no  right. 

I  respectfully  submit  that  in  neither  of  these  instances, 
from  actual  experience,  can  there  be  found  the  principle 
of  true  competition. 

To  make  the  case  still  plainer,  I  will  suppose, 
merely  by  way  of  illustration  (what  may  in  fact  occur 
at  any  time  in  any  portion  of  the  country),  that  two 
existing  roads  between  well-known  competing  points 
become  entangled  in  misunderstandings  which  keenly 
develop  this  so-called  competition.  I  will  take  the 
liberty  of  citing  New  Orleans  and  Galveston,  on  the 
one  hand,  and  El  Paso,  Texas,  on  the  other, — El  Paso 
being  one  of  our  commercial  gateways  to  Mexico, — betwee  i 


4« 


it   ,■ 


which  cities  run  two  rail  lines  that  actively  canvass  for 
business  in  competition  with  each  other.  Happily  both 
properties  are  conservatively  managed  ;  but  suppose,  to  suit 
our  purpose  in  illustration,  their  interests  should  seem  to 
clash  and  their  misunderstanding  involve  them  in  what  is 
popularly  termed  a  "war."  The  rates  to  El  Paso  would 
immediately  be  cut  down  on  business  from  both  Gulf 
cities,  and  while  the  latter  were  thus  situated,  the  mer- 
chants of  St.  Louis,  Kansas  City  and  Chicago  would  be 
unable  to  sell  their  wares  in  El  Paso  because  of  the  dis- 
crimination in  favor  of  those  at  New  Orleans  and  Galveston 
through  the  cut  in  lates.  Impelled  by  the  entreaties 
of  their  patrons,  eager  to  maintain  their  standing  in 
that  market,  the  roads  from  the  Northern  cities  must 
cut  their  rates  to  meet  those  from  the  cities  in  the  South. 
Similarly  the  California  shippers,  and  the  anxiety  of  their 
rail  line  to  maintain  the  status  of  California  in  that  market, 
would  force  a  cut  in  rates  from  the  Pacific  Coast  to  El  Paso. 
Thus  at  a  glance  it  will  be  seen  that  a  matter  which 
merely  concerned  two  roads  within  a  limited  area  has, 
through  their  unrestricted  power  for  harm  in  case  of 
conflict,  disturbed  the  commercial  equilibrium  of  all  cities 
competing  for  the  trade  in  question,  and  has  led  to  sacri- 
fice of  the  revenues  of  railroad  lines  having  no  direct 
interest  whatever  in  the  initial  cause  of  the  trouble. 
Further,  if  it  is  borne  in  mind  that  every  cu.  in  rates  thus 
made  would,  under  the  "  long  and  short  haul  clause,"  affect 
rates  from  or  to  intermediate  points,  the  extent  of  the 
damage  inflicted  is  made  more  clear.  If  the  struggle  con- 
tinues, the  irritation  must  become  more  intense  and  ex- 
tended ;  and  as  rates  between  Eastern  cities  and  the  Pacific 
Slope,  for  example,  cannot  exceed  die  sum  of  the  local 
rates,  the  whole  Trans-continental  traffic  of  the  country 
may  readily  become  demoralized. 

Perhaps  I  should  make  this  plainer.     The  rate  on  any 
commodity  moving  from  New  Orleans,  for  instance,  to  San 


V* 


47 


Francisco,  cannot,  in  practice  or  under  the  law,  exceed  the 
rate  from  New  Orleans  to  El  Paso  added  to  the  rate  from 
El  Paso  to  San  Francisco.  When  rates  between  New 
Orleans  f.nd  El  Paso,  and  at  the  same  time  those  between 
El  Paso  and  San  Francisco,  are  cut  below  a  certain  limit, 
it  is  manifest  that  rates  between  New  Orleans  and  San 
Francisco  become  affected;  similarly  the  rates  between 
Kansas  City,  St.  Louis  and  Chicago,  on  the  one  hand,  and 
the  Pacific  Slope,  on  the  other,  are  dntwn  into  the  struggle; 
and  as  the  merchants  of  Omaha  and  St.  Paul  will  not 
stand  idly  by  and  see  Kansas  City  and  St.  Louis  control 
California  business  merely  because  the  rates  via  El  Paso 
are  shattered,  they  too  will  be  forced  into  the  wasteful 
struggle. 

I  risk  your  patience  by  thus  going  into  detail  because  I 
want  to  make  the  conclusion  clear,  that  railroad  wars  are 
not  in  the  nature  of  true  competition.  In  the  assumed 
instance  before  us,  the  only  competition  involved  was  that 
between  New  Orleans  and  Galveston  on  the  one  hand, 
and  El  Paso  on  the  other,  or  somewhere  between  these 
points,  directly  affecting  only  the  interests  of  the  two  lines 
between  which  I  have  supposed  the  trouble  to  arise. 
Notwithstanding  this  fact,  the  action  of  the  road  which  in 
such  a  situation  should  precipitate  a  conflict  might,  as  we 
have  seen,  embroil  the  whole  country,  demoralizing  trade 
and  dissipating  railroad  earnings,  and  all  from  causes 
beyond  the  control  of  the  victims.  This  is  not  railroad 
competition;  it  does  not  spring  from  excessive  lailroad 
rates  or  through  any  fault  of  the  railroads  thus  made 
needlessly  io  suffer  by  the  acts  of  other  lines  in  localities 
perhaps  remote.  T/ie  railroads  are  but  the  servitoi's  of 
the  cities  with  whose  interests  they  are  directly  connected^ 
and  identify  themselves  with  the  public  ivelfare  by  be- 
coming the  equalizing  medium  for  maintaining  the  com- 
menial  standing  of  those  cities.  When  the  fray  is  ended 
and  the  field  surveyed,  \\  is  always  found  that  the  relative 


r 


position  of  all  has  remained  unchanged,  each  locality 
having  found  it  necessary  to  struggle  with  tV  aim  of  hold- 
ing its  own,  fortunate  if  it  has  achieved  even  that. 
Railroad  competition  is  one  thing,  railroad  disaster  springing 
from  such  causes  as  I  have  assumed  to  illustrate  is  quite 
another;  and  it  is  such  follies  I  would  seek  to  regulate. 

Railroad  Co-operation  Conducive  to  Maintenance 
OF  Normal  Commercial  Conditions. 

For  this  feverish,  spasmodic,  speculative  and  dangerous 
thing  to  which  the  name  of  railroad  competition  has  been 
thoughtlessly  applied,  I  would  substitute  tariffs  determined 
after  careful  consideration  of  the  needs  of  the  shipper  and 
the  way  the  railroads  can  most  fully  and  fairly  meet  them. 
Such  tariffs,  I  would  urge,  can  be  more  satisfactorily  ad- 
justed when  the  carriers  co-operate,  than  under  any  other 
conditions. 

With  strife  rampant,  a  tariff  becomes  merely  a  maximum 
to  cut  from,  a  foundation  for  improper  discrimination,  a 
schedule  of  charges  to  be  levied  on  the  innocent  and 
unwary,  but  likely  to  be  evaded  in  its  application  to  the 
shrewd  or  large  and  influential  shipper.  Under  the  pool- 
ing system,  on  the  contrary,  it  ceases  to  be  all-important 
that  the  business  be  taken  from  the  rival  road  even  at 
the  cost  of  '*  cutting  rates  to  the  bottom;"  it  ceases  to  be 
important  that  the  merchant  spend  his  days  in  "shop- 
ping" for  a  low  rate  and  urging  the  competing  roads  to 
further  reductions  each  below  the  other,  in  the  hope  of  scor- 
ing a  victory  by  securing  the  coveted  tonnage.  It  is, 
instead,  all  important  that  as  business  has  to  be  secured 
under  open  and  stable  rates,  each  road  shall  be  operated 
with  an  eye  to  rendei  ing  the  most  efficient  service  in  further- 
ance of  its  own  interests  ;  and  it  is  of  ever-increasing 
importance  that  the  tariff  rates  under  which  the  business 


49 

is  sought  shall  be  so  constnicted  as  to  stimulate  the  move- 
ment of  traffic,  that  the  roads  may  enjoy  that  steadily 
increasing  revenue  for  which  they  can  only  reasonably 
hope  through  healthy  commercial  conditions,  when  they 
shall  receive  and  render  value  for  value,  in  just  recompense 
for  services  performed.  Thus  properly  stimulated  to 
advance  their  own  interests  by  careful  consideration  of 
their  patrons'  needs,  they  are  in  another  direction  properly 
restrained  by  the  most  powerful  influences  which  can  be 
brought  to  bear  on  railrod!(J  managers,  namely,  the  inefface- 
able  competition  of  water-ways, — which,  however  it  may 
be  checked,  can  never  be  broken  down, — and  the  mighty 
voice  of  public  opinion.  Regarding  the  latter,  a  well- 
known  writer*  of  recognized  experience  justly  remarks  : 

"  The  restraining  force  of  public  opinion,  and  respect 
"for  the  common  and  statute  law,  operate  upon  railway 
* '  traffic  management  with  more  power  than  is  popularly 
''known  or  believed.  Railways  dislike  to  create  public 
"issues  as  to  their  charges,  and  do  muc.i  more  to  avoid 
"than  stimulate  them  ;  and  I  refer  in  confirmation  of  this 
"averment  to  every  State  Railway  Commission  in  the 
"Union.  Railways  co-operate  with  and  concede  to  them 
"  far  more  than  they  antagonize  or  dissent  from  them." 

In  this  reflection  every  one  having  experience  in  railroad 
management  will  fully  concur;  and  I  believe  the  experience 
of  the  Interstate  Commerce  Commission  will  further  sus- 
tain it. 

Railroad  Co-operation  vs.  Combined  Ownership. 

It  is  unfortunate  that  the  public  mind  confounds  rail- 
way co-operation  in  pools  with  joint  railway  ownership; 
whereas  the  difference  between  the  two  relations  is 
wide  and  important.     A  recent  writer  has  pointed  out 


*  G.  R.  Blanchard,  on  "  Traffic  Unity,"  1834. 


so 


c 


Sr, 


that  the  distinction  is :  A  pooling  arrangement  be- 
tween railroads  is  merely  an  administrative  union  within 
well-defined  bounds  ;  while  combined  ownership  means 
organic  and  fiscal  union.  Under  a  pool,  each  road  remains 
invested  with  its  responsibilities ;  its  organization  is  not 
disturbed ;  it  has  to  maintain,  and,  if  possible,  increase  its 
earnings,  and  has  to  do  so  on  a  fair  basis,  without  resort 
to  unfair  discriminations  and  covert  devices ;  it  has,  in 
short,  every  incentive  to  develop  to  the  utmost  all  the 
traffic  that  prudent  management  can  see  its  way  to  hand- 
ling at  fair  rates  ;  and,  by  fair  rates,  I  mean  rates  fair  alike 
to  the  shipper  and  the  carrier.  Rightly  or  wrongly,  the 
public  apprehends  some  hidden  danger  from  the  combi- 
nation of  ownerships  in  railroad  properties,  unmindful 
that  all  such  combinations  of  any  extent  in  the  past  have 
resulted  in  an  increase  of  facilities  and  a  reduction  in  the 
cost  of  transportation.  It  is  at  least  an  anomaly  that  those 
who  view  with  misgiving  the  reaction  in  favor  of  extend- 
ing and  combining  railroad  ownership  should,  at  the  same 
time,  prohibit  competing  carriers  from  adopting  the  only 
method  yet  devised  to  protect  themselves  from  destructive 
conditions,  while  yet  maintaining  their  separate  identity 
and  responsibilities. 


RefIvBCI'ions  of  Hon.  Thomas  M.  CooijfiY. 


In  venturing  thus  to  address  you  at  such  length  on  this 
broad  subject,  I  derive  much  encouragement  and  hope 
from  the  reflection,  that  in  my  convictions  I  am  generally 
sustained  by  no  less  an  authority  on  affairs  pertaining  to 
transportation  and  its  administration  than  the  Honorable 
Thos.  M.  Cooley,  Chairman  of  the  Interstate  Commerce 
Commission,  over  whose  signature  was  published  in  th« 
Chicago  Railway  Review  of  April  26,  1884,  a  paper  en- 
titled  "Popular  and  Legal  Views  of  Traffic  Pooling," 


51 


which  is  a  most  able  and  pithy  exposition  of  the  topic.  I 
cannot  refrain  from  quoting  his  conchiding  remarks, 
replete  with  profound  and  significant  suggestion  : 

"That  the  railroad  problem,  so  far  as  it  is  involved  in 
wars  of  rates  between  the  roads,  cannot  as  yet  be  consid- 
ered solved,  is  very  manifest ;  the  railroad  companies 
have  only  made  an  effort  in  the  direction  of  solving  it. 
Common  agreements,  if  they  had  the  encouragement 
and  protection  of  the  law,  would  very  probably  supply 
it ;  but  for  that  purpose  legislation  would  seem  to  be 
essential;  but  legislation  would  be  mischievous  rather 
than  beneficial,  unless  it  was  conceived  in  the  spirit  of 
statesmen,  and  was  made  to  express  neither  special 
favor  for,  nor  special  hostility  to,  the  interest  it  would 
regulate.  The  railroad  interest  of  this  country  repre- 
sents an  enormous  aggregate  of  wealth,  and  an  increas- 
ing aggregate  of  corporate  poverty;  and  it  has  immense 
capabilities  for  good  or  evil  to  the  people.  It  can- 
not possibly  be  for  the  interest  of  any  country  that 
so  large  a  proportion  of  the  invested  capital  should 
be  wasted  or  unremunerative,  especially  when  in  that 
condition  its  necessary  tendency  is  to  favor  dishonest 
management  and  gambling  speculation.  On  the  other 
hand,  it  is  for  the  interest  of  the  country  that  the  public 
shall  receive,  in  as  large  a  degree  as  shall  be  possible,  the 
benefits  which  were  calculated  upon  in  providing 
by  law  for  the  building  of  the  roads.  Regulating 
legislation,  should  therefore,  be  conceived  neither 
exclusively  in  the  interest  of  railroad  companies 
nor  in  the  spirit  of  hostility  to  them.  What  the  country 
needs  is  that  they  shall  be  made  useful  •  not  that  they 
shall  be  crippled  or  bankrupted,  or  made  stock-jobbing 
conveniences  for  their  managers.  And,  no  doubt,  when 
the  whole  subject  is  carefully  examined  and  wisely  con- 
sidered, it  will  be  found   that  the  true   interests  of  the 


53 


It 


"owners  of  railroad  property  may  be  used  to  harmonize 
*'  perfectly  with  the  true  interests  of  the  public,  and  that 
'*  it  will  be  as  wise  for  the  State  to  encourage  and  protect 
' '  whatever  in  corporate  arrangements  is  of  beneficial  ten- 
**  dency  as  it  will  to  suppress  what  is  mischievous." 


Suggested  Changes  in  the  Law. 


I 

>*>. 


f: 

r 


ill 


I  would  accordingly  respectfully  urge  on  your  Honorable 
body  that  our  relations  with  Canada  render  proper  and 
just  a  suggestion  that  Congress  revoke  the  provision  of  the 
law  which  prohibits  pooling,  and  thereby  deprives 
American  carriers  of  one  means  of  defense  against  their 
Canadian  rival,  as  indicated  in  my  answer  to  your  15th 
interrogatory.  Even  in  the  event  of  legislation  on  the 
lines  so  clearly  laid  down  in  the  language  I  have  quoted 
from  the  Hon.  Thos.  M.  Cooley,  who  was  at  that  time 
Justice  of  the  Supreme  Court  of  Michigan,  and  Professor 
of  Constitutional  Law  in  the  University  of  that  State,  I 
believe  the  interests  of  the  people  as  well  as  the  railroads 
could  be  fully  protected  by  placing  the  pooling  organiza- 
tions under  the  scrutiny  of  the  Interstate  Commerce 
Commission,  who  could  exercise  like  regulative  functions 
in  reference  thereto  as  now  delegated  to  them  by  Con- 
gress in  matters  pertaining  to  interstate  traffic.  Finally, 
I  believe  such  organizations  would  greatly  facilitate  the 
administration  of  the  Interstate  Commerce  Law  and 
lighten  the  arduous  labors  of  the  Interstate  Commission. 
Such  Governmental  scrutiny  would  be  an  assurance  of 
justice  to  the  railroads  and  safety  to  the  people,  and  would, 
under  the  lash  of  public  opinion,  soon  force  fractious  and 
unscrupulous  roads  into  a  reasonable  attitude ;  for  it  would 
surely  develop  that  the  road  declining  to  co-operate  in 
the  maintenance  of  proper  competitive  conditions  "con- 
templates some  wrong  against  a  competitor  or  the  public." 


>) 


53 
Conclusion. 

The  railroads  have,  from  the  beginning  and  everywhere, 
been  the  great  creators  and  distributors  of  the  nation's 
wealth.  They  are  the  potent  agencies  which  have  trans- 
formed worthless  and  uninhabitable  places  into  empires  of 
wealth  and  population.  They  have  wrested  an  empire 
from  the  wilderness  and  supplanted  the  Indian's  wigwam 
with  the  white  man's  home  more  effectually  than  could  the 
pioneer's  rifle  or  the  national  arms.  With  their  facilities 
for  transportation,  they  have  made  possible  and  profitable 
the  settlement  of  all  sections  of  the  republic,  which  other- 
wise must  have  been  confined  to  a  limited  area  along  the 
great  waterways.  Their  operation  has  made  us  exception- 
ally rich  in  all  that  goes  to  make  a  nation  great  and 
prosperous,  and  they  are  in  this  respect  g^reater  conquerors 
than  the  sword.  They  have  become  the  arteries  of 
our  vast  commercial  system^  and  as  such  are  entitled  to 
worthy  recognition.  They  should  not  have  to  sue  as 
suppliants  for  justice ;  but,  their  existence  and  encourage- 
ment ever  going  hand  in  hand  with  the  nation's  prosperity, 
they  should  be  freely  granted  what  measures  of  relief  and 
protection  Congress  in  its  wisdom  can  yield.  To  the  need 
of  such  measures  I  have  aimed  in  this  letter  to  call  atten- 
tion, so  far  as  the  limits  of  my  subject  allow. 

I  believe  that  this  Government  should  not  grant  any 
concessions  to  foreign  carriers  that  can  be  used  to  the 
prejudice  of  our  domestic  interests.  Apropos  of  this  point, 
my  attention  has  just  been  called  to  an  issue  of  the  Japan 
Daily  Herald^  dated  Yokohoma,  i8th  May,  1889,  in  which 
I  find  the  following: 

"  The  new  Canadian  Pacific  line  seems  at  last  to  be 
"getting  into  practical  shape.     On  the   17th  April,  Mr. 
"  Foster  was   to  introduce  into  the  Canadian  House  of 
"Commons,    at  Ottawa,    three    resolutions.      The    first 
"  provided  for  a  subsidy  for  a  fortnightly  line  of  steamers 


54 


f 


f* 


"  between  British  Columbia  and  Australia ;  the  second  was 
**  to  grant  a  subsiby  of  $5<x),ooo  per  annum  for  a  weekly 
"fast  line  of  steamers  between  Canada  and  the  United 
*•  Kingdom  ;  a  contract  for  these  has,  it  is  since  reported, 
'*  been  made  with  Anderson  &  Co.,  of  the  Orient  line, 
*'  who  are  to  provide  steamers  of  over  twenty  knots  speed, 
**  thus  bringing  the  termini  within  six  days  of  each  other. 
'*  The  third  resolution  provided  that  if  Great  Britain  gives 
*'  not  less  than  ;^45,ooo  per  annum  for  a  monthly  service, 
"nor  less  than  ;^75,ooo  per  annum  for  a  fortnightly 
"service  between  British  Columbia,  China  and  Japan,  the 
"Governor-General  in  Council  may,  on  behalf  of  Canada, 
"add  _;^i5,ooo  in  the  one  case,  or  ;^25,ooo  in  the  other, 
"  to  the  sums  granted  by  Great  Britain." 

I  believe  that  a  railroad  system  built  by  a  foreign  power 
as  a  military  measure,  and  with  the  avo-ved  object  of 
promoting  trade  between  the  provinces  of  1 1  nntry  that 
created  it,  by  withdrawing  their  trade  fr  i-.  i  le  United 
States  ;  whose  further  object  is,  by  subsidies  on  land  and 
sea,  to  divert  from  us  to  the  Canadian  route  the  traffic  be- 
tween the  North  American  Continent  and  the  Orient  on  the 
one  hand,  and  Europe  on  the  other,  as  well  as  tha*^  between 
Trans- Pacific  and  Trans-Atlantic  countries,  should  not  be 
favored  where  favors  can  be  withheld.  It  should  not,  for 
example,  be  permitted  to  promote  its  cherished  objects  by 
the  use,  or  rather  the  abuse,  of  our  custom  laws  regarding 
transportation.  These  laws  were  intended  to  facilitate  the 
handling  of  exports  and  imports  by  American  merchants 
and  carriers,  and  should  not  now  be  deflected  to  the 
unpatriotic  purpose  of  turning  into  Canadian  channels  the 
current  of  traffic  in  American  bonded  merchandise. 

I  would  emphasize  my  belief  also  that  American  carriers 
should  be  relieved  of  the  onerous  restrictions  laid  upon 
them  by  the  fourth  and  fifth  sections  of  the  Interstate  Com- 
merce I/aw,  so  that  they  may  not  be  denied  any  reasonable 


55 

facility  to  enable  them  to  contest  their  own  ground  against 
invading  carriers. 

Finally,  I  think  it  of  the  utmost  importance  to  the 
welfare  of  our  people  and  the  integrity  of  our  institutions 
that  this  Government  strenuously  assert  as  its  doctrine 
and  policy,  "  Protection,  not  only  to  American  industry 
and  manufactures,  but  to  American  enterprise  of  whatso- 
ever kind  or  nature." 

Respectfully  submitted, 


A.  N.  TOWNE. 


San  Francisco,  June  20,  1889. 


y 


